n Congress  \ 
1st  Session  J 


economics 

DEPWTMEHT 

SENATE 


f Document 
I No.  40 


SUPREME  COURT  OF  THE  UNITED  STATES 


Nos.  118  and  1 19.— October  Term,  1910 


THE  UNITED  STATES  OF  AMERICA, 
APPELLANT 

V. 

HE  AMERICAN  TOBACCO  COMPANY  AND 

OTHERS 


OPINION  OF  THE  COURT  DELIVERED  BY 
MR.  CHIEF  JUSTICE  WHITE 

DISSENTING  OPINION  BY  MR.  JUSTICE  HARLAN 


DELIVERED  MAY  29,  1911 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
1911 


In  the  Senate  of  the  United  States, 

June  1 , 1911. 

Ordered,  That  the  opinion  of  the  Supreme  Court  of  the  United  States  in  the 
case  of  the  American  Tobacco  Co.  et  al.,  appellants,  v.  The  United  States,  with 
the  dissenting  opinion  of  Justice  Harlan,  be  printed  as  a Senate  document. 
Attest : 


2 


Charles  G.  Bennett,  Secretary. 


SUPREME  COURT  OF  THE  UNITED  STATES. 


Nos.  118  and  119. — October  Term,  1910. 

& 


118 

The  United  States  of  America, 
appellant, 

v. 

The  American  -Tobacco  Company  and 
others. 

119 

The  American  Tobacco  Company  and 
others,  appellants, 

v. 

The  United  States  of  America. 

[May  29,  1911.] 

Mr.  Chief  Justice  White  delivered  the  opinion  of  the  court: 

This  suit  was  commenced  on  July  19,  1907,  by  the  United  States,  to 
prevent  the  continuance  of  alleged  violations  of  the  first  and  second 
sections  of  the  antitrust  act  of  July  2,  1890.  The  defendants  were  29 
individuals,  named  in  the  margin,1  65  American  corporations,  most 
of  them  created  in  the  State  of  New  Jersey,  and  2 English  corpora- 
tions. For  convenience  of  statement  we  classify  the  corporate  de- 
scendants, exclusive  of  the  2 foreign  ones,  which  we  shall  hereafter 
separately  refer  to,  as  follows:  The  American  Tobacco  Co.,  a New 
Jersey  corporation,  because  of  its  dominant  relation  to  the  subject 
4 matter  of  the  controversy  as  the  primary  defendant,  5 other  New 
Jersey  corporations  (viz,  American  Snuff  Co.,  American  Cigar  Co., 
American  Stogie  Co.,  MacAndrews  & Forbes  Co.,  and  Conley  Foil 
7 Co.),  because  of  their  relation  to  the  controversy  as  the  accessory, 
and  the  59  other  American  corporations  as  the  subsidiary  defendants. 
The  ground  of  complaint  against  the  American  Tobacco  Co.  rested 
^.not  alone  upon  the  nature  and  character  of  that  corporation  and  the 

S’  - 

d Hames  B.  Duke,  Caleb  C.  Dula,  Percival  S.  Hill,  George  Arents,  Paul  Brown,  Robert  B. 
\-7Dula,  George  A.  Ilelino,  Robert  D.  Lewis,  Thomas  J.  Maloney,  Oliver  IT.  Payne,  Thomas 
F.  Ryan,  Robert  K.  Smith,  George  W.  Watts,  George  G.  Allen,  John  B.  Cobb,  William  It. 
OHarris,  William  H.  McAlister,  Anthony  N.  Brady,  Benjamin  N.  Duke,  H.  M.  Ilanna, 
— Herbert  I).  Kingsbury,  Pierre  Lorillnrd,  Rufus  L.  Patterson,  Frank  II.  Ray,  Grant  B. 
Schley,  Charles  N.  Strotz,  Peter  A.  B.  Widener,  Welford  C.  Reed  (now  deceased),  and 
Williamson  W.  Fuller. 

f 357S5 


Appeals  from  the  Circuit 
Court  of  the  United 
States  for  the  Southern 
District  of  New  York. 


3 


4 the  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 


power  which  it  exerted  directly  over  the  five  accessory  corporations 
and  some  of  the  subsidiary  corporations  by  stock  ownership  in  such 
corporations,  but  also  upon  the  control  which  it  exercised  over  the 
subsidiary  companies  by  virtue  of  stock  held  in  said  companies  by  the 
accessory  companies  by  stock  ownership  in  which  the  American  To- 
bacco Co.  exerted  its  power  of  control.  The  accessory  companies 
were  impleaded  either  because  of  their  nature  and  character  or  be- 
cause of  the  power  exerted  over  them  through  stock  ownership  by 
the  American  Tobacco  Co.  and  also  because  of  the  power  which  they 
in  turn  exerted  by  stock  ownership  over  the  subsidiary  corporations, 
and,  finally,  the  subsidiary  corporations  were  impleaded  either  be- 
cause of  their  nature  or  because  of  the  control  to  which  they  were 
subjected  in  and  by  virtue  of  the  stock  ownership  above  stated.  We 
append  in  the  margin  a statement  showing  the  stock  control  exercised 
by  the  principal  defendant,  the  American  Tobacco  Co.,  over  the  five 
accessory  corporations  and  also  the  authority  which  it  directly  ex- 
ercised over  certain  of  the  subsidiary  corporations,  and  a list  showing 
the  control  exercised  over  the  subsidiary  corporations  as  a result  of 
the  stock  ownership  in  the  accessory  corporations,  they  being  in  turn 
controlled,  as  we  have  said,  by  the  principal  defendant,  the  American 
Tobacco  Co.1 


1 Extent  of  control  of  American  Tobacco  Co.  over  the  accessory  corporations  : 

American  Snuff  Co.  Of  120.000  shares  of  preferred  stock  owns  12,517  shares  directly 
and  11,274  shares  by  reason  of  stock  control  of  P.  Lorillard  Co.,  in  all,  23,764  shares;  of 
110,017  shares  of  common  stock  owns  41,214  directly  and  34,594  by  reason  of  stock  con- 
trol of  P.  Lorillard  Co.,  in  all,  75,808  shares. 

American  Cigar  Co.  Of  100,000  shares  of  preferred  stock  owns  89,700  shares  directly 
and  5,000  shares  through  control  of  American  Snuff  Co.,  in  all,  94,700  shares;  of  100,000 
shares  of  common  stock  owns  directly  77,451  shares. 

American  Stogie  Co.  Of  108,790  shares  of  common  stock  controls  73,072|  shares 
through  stock  interest  in  American  Snuff  Co.  The  American  Stogie  Co.  owns  all  of  the 
stock — 12.500 — of  the  Union  American  Cigar  Co. — cigars  and  stogies. 

MacAndrews  & Forbes  Co.  Of  37,583  shares  of  preferred  stock  (no  voting  power) 
owns  7,500  shares  ; of  30,000  shares  of  common  stock  owns  21,129  shares  directly  and 
983  shares  through  stock  control  of  the  R.  J.  Reynolds  Co.,  in  all,  22,112  shares. 

The  Conley  Foil  Co.  Of  8,250  shares  of  stock,  directly  owns  4,950  shares. 

The  American  Tobacco  Co.  By  stock  ownership  is  the  owner  outright  of  the  following 
defendant  companies  : S.  Anargyros  (the  S.  Anargyros  Co.  owns  all  the  capital  stock,  10 
shares,  of  the  London  Cigarette  Co.)  ; F.  F.  Adams  Tobacco  Co. ; Blackwell’s  Durham  To- 
bacco Co. ; Crescent  Cigar  & Tobacco  Co. ; Day  & Night  Tobacco  Co.  ; Luhrman  & Wilbern 
Tobacco  Co. ; Nall  & Williams  Tobacco  Co.  ; Nashville  Tobacco  Works  ; R.  A.  Patterson 
Tobacco  Co.  ; Monopol  Tobacco  Works  ; Spalding  & Merrick. 

The  American  Tobacco  Co.  also  has  the  stock  interest  indicated  in  the  following  de- 
fendant corporations  : 

British-American  Tobacco  Co.  Owns  1.200,000  shares  of  1,500,000  shares  of  preferred 
stock  and  2,280,012  shares  of  3,720,021  shares  of  common  stock. 

The  Imperial  Tobacco  Co.,  etc.  Owns  721,457  pounds  sterling  of  18,000,000  pounds 
sterling  of  stock.  „ ^ 

The  John  Bollman  Co.  Of  2,000  shares  of  stock  owns  1,020  shares. 

F.  R.  Penn  Tobacco  Co.  Of  1,503  shares  of  stock  owns  1,002  shares  (through  Black- 
well’s Durham  Tobacco  Co.).  „ _ _ , „ . , 

R.  P.  Richardson,  jr.,  & Co.  (Inc.).  Owns  600  out  of  1,000  shares  of  stock  and  $120,000 
of  $200,000  issue  of  bonds. 

R.  J.  Reynolds  Tobacco  Co.  Owns  50,000  out  of  75,250  shares  of  stock. 

Pinkerton  Tobacco  Co.  Owns  775  out  of  1,000  shares  of  stock. 

Reynolds  Tobacco  Co.  (of  Bristol,  Tenn.).  Owns  1,449  shares  out  of  2,500  shares. 

J.  W Carroll  Tobacco  Co.  Owns  2,000  out  of  3,000  shares. 

P.  Lorillard  Co.  Owns  15,813  out  of  20,000  shares  of  preferred  and  all  the  common 
stock  (30,000  shares).  „ 

Kentucky  Tobacco  Product  Co.  Owns  14  of  1,900  shares  preferred  and  owns  directly 
5,264,  and,  through  the  American  Cigar  Co.,  355  out  of  8,100  shares  of  common  stock. 
(The  Kentucky  Tobacco  Product  Co.  owns  all  the  capital,  stock,  100  shares,  of  the  Ken- 
tucky Tobacco  Extract  Co.)  _ . I ' 

Porto  Rican-American  Tobacco  Co.  Owns  directly  6,578,  and,  through  the  American 
Cigar  Co.,  6,576  of  19,984  shares  of  stock.  (The  Porto  Rican-American  Tobacco  Co.  owns 
190  of  the  380  shares  of  preferred  and  300  of  the  450  shares  of  common  stock  of  Inde- 
pendent Co.  of  Porto  Rico  ; also  owns  2,150  of  the  5,000  shares  of  capital  stock  of  the 
Porto  Rico  Leaf  Tobacco  Co.)  ..  . . , . . . 

The  American  Tobacco  Co.  is  also  interested,  as  indicated,  in  the  following  defendants, 
supply  or  machinery  companies  : 

Golden  Belt  Manufacturing  Co.  (cotton  bags).  Owns  6.521  of  7,000  shares 

Mengel  Box  Co.  (wooden  boxes).  British-American  Tobacco  Co.  owns  3,637  or  5,000 
shares  of  stock.  (The  Mengel  (<b.  owns  all  of  the  capital  stock  of  the  Columbia  Box  Co. 
and  of  the  Tyler  Box  Co.,  respectively  1,500  and  250  shares.) 


THE  AMERICAN  TOBACCO  CO.  ET  AH.  V.  THE  UNITED  STATES.  5 


The  two  foreign  corporations  were  impleaded  either  because  of 
their  nature  and  character  and  the  operation  and  effect  of  contracts 
or  agreements  with  the  American  Tobacco  Co.  or  the  power  which 
it  exerted  over  their  affairs  by  stock  ownership. 

As  we  shall  have  occasion  hereafter  in  referring  to  matters  beyond 
dispute  to  set  forth  the  main  facts  relied  upon  by  the  United  States 
as  giving  rise  to  the  cause  of  action  alleged  against  all  of  the  defend- 
ants it  suffices  at  this  moment  to  say  that  the  bill  averred  the  origin 


Amsterdam  Supply  Co.  (agency  to  purchase  supplies).  Owns  majority  of  stock  and 
controls  large  part  of  remainder  through  subsidiary  companies. 

Thomas  Cusack  Co.  (bill  posting).  Owns  1,000  out  of  1,500  shares. 

Manhattan  Briar  Pipe  Co.  Owns  all  of  stock,  3,500  shares. 

International  Cigar  Machinery  Co.  Of  100,000  shares  owns  33,637  shares  directly  and 
29,902  shares  through  American  Cigar  Co. — in  all  63,539  shares. 

The  American  Tobacco  Co.  is  also  interested  in  the  following  companies,  not  named  as 
defendants  : 

American  Machine  & Foundry  Co.  Owns  510  shares  directly  and  remainder  (490) 
through  American  Cigar  Co. 

New  Jersey  Machine  Co.  Owns  510  shares  directly  and  remainder  (490)  through 
American  Cigar  Co. 

Standard  Tobacco  Stemmer  Co.  Of  17,300  shares  owns  16,895  shares. 

Garson  Vending  Machine  Co.  Of  500  shares  owns  250  shares. 

The  American  Snuff  Co.,  in  addition  to  stock,  etc.,  interests  in  the  American  Tobacco 
Co.,  American  Cigar  Co.,  and  the  Amsterdam  Supply  Co.,  has  stock  interests  in  the  fol- 
lowing defendants  : 

H.  Bolander.  Owns  all  of  stock,  1,350  shares. 

De  Voe  Snuff  Co.  Owns  all  of  stock,  500  shares.  (The  De  Voe  Snuff  Co.  owns  all  the 
capital  stock,  400  shares,  of  Skinner  & Co.,  snuff.) 

Standard  Snuff  Co.  Owns  all  of  stock,  2,816  shares. 

The  American  Cigar  Co.,  in  addition  to  stock  interests  in  the  Amsterdam  Supply  Co., 
American  Stogie  Co.,  Porto  Rican-American  Tobacco  Co.,  Kentucky  Tobacco  Product  Co., 
and  International  Cigar  Machinery  Co.,  has  the  stock  interest  indicated  in  the  following 

defendants  : 

R.  D.  Burnett  Cigar  Co.  Owns  77  out  of  150  shares. 

M.  Blaskower  Co.  Owns  1,875  out  of  2,500  shares  preferred  and  1,875  out  of  2,500 

shares  of  common. 

Cuban  Land  & Leaf  Tobacco  Co.  Owns  all  of  stock,  1,000  shares.  (The  Cuban  Land, 
etc.,  Co.  owns  1,320  of  the  1,890  shares  of  stock  of  the  Vuelta  Abajo  Steamship  Co.) 

Cliff  Weil  Cigar  Co.  Owns  255  out  of  500  shares. 

Dusel,  Goodloe  & Co.  Owns  510  out  of  750  shares. 

Federal  Cigar  Real  Estate  Co.  Owns  all  stock,  6,000  shares. 

J.  J.  Goodrum  Tobacco  Co.  Owns  477  out  of  600  shares. 

Havana-American  Co.  Owns  all  stock,  2,500  shares. 

Havana  Tobacco  Co.  Owns  700  shares  out  of  47,038  preferred,  166,800  out  of  297,912 
common  stock,  and  $3,500,000  of  $7,500,000  bonds. 

Jordan  Gibson  & Baum  Co.  (Inc.).  Owns  all  preferred  and  common  stock,  250  shares 

each. 

Louisiana  Tobacco  Co.  (Ltd.).  Owns  375  out  of  500  shares. 

The  J.  B.  Moos  Co.  Owns  all  of  stock,  2,000  shares. 

J.  & B.  Moos.  Owns  all  of  common  stock,  1,000  shares. 

Porto  Rican  Leaf  Tobacco  Co.  Owns  2,500  out  of  5,000  shares. 

The  Smokers’  Paradise  Corporation.  Owns  all  of  common  stock,  250  shares,  and  349 

of  500  shares  preferred. 

Havana  Tobacco  Co.  has  a stock  interest  in  the  following  corporations  : 

H.  de  Cabanis  y Carbajal.  All  of  stock,  15,000  shares. 

Hy.  Clay  and  Bock  & Co.  (Ltd.).  Owns  9,749  out  of  16,950  shares  preferred  and  14,687 
out  of  15,990  shares  common.  (The  Hy.  Clay,  etc.,  Co.  is  owner  of  16,667  shares  of  the 
ordinary  capital  stock  of  the  Havana  Cigar  & Tobacco  Factories  (Ltd.),  and  also  owns 
64  shares  of  the  1,890  shares  of  the  capital  stock  of  the  Vuelta  Abajo  Steamship  Co.) 
Cuban  Tobacco  Co.  Owns  all  of  stock,  50  shares. 

Havana  Commercial  Co.  Owns  55,562  out  of  60,000  shares  preferred  and  124,718  out 
of  125,000  shares  common.  (The  Havana  Commercial  Co.  owns  all  of  the  capital  stock, 
100  shares,  of  the  M.  Valle  y Co.,  cigars.) 

Havana  Cigar  & Tobacco  Factories  (Ltd.).  Owns  6,774  out  of  25,000  shares  ordinary 

stock. 

J.  S.  Murias  y Co.  Owns  all  of  stock,  7,500  shares. 

Blackwell’s  Durham  Tobacco  Co.  In  addition  to  a stock  interest  in  the  Amsterdam 
Supply  Co.,  has  the  stock  interest  indicated  in  the  following  defendant  corporations  : 

F.  P.  Penn  Tobacco  Co.  Owns  1,002  out  of  1,503  shares. 

Scotten-Dillon  Co.  Owns  $10,000  out  of  $500,000  of  stock. 

Wells-Whitehead  Tobacco  Co.  Owns  all  of  stock,  1,500  shares. 

Conley  Foil  Co.  Owns  all  of  the  capital  stock,  3,000  shares,  of  the  Johnston  Tin  Foil 

& Metal  Co. 

P.  Lorillard  Co.  Has  a stock  interest  in  the  American  Snuff  Co.  and  the  Amsterdam 

Supply  Co. 

R.  J.  Reynolds  Tobacco  Co.  In  addition  to  a stock  interest  in  the  Amsterdam  Supply 
Co.  and  the  MacAndrews  & Forbes  Co.,  owns  one-third  of  the  5,000  shares  of  stock  of 

the  Lipfert  Scales  Co. 

The  British-American  Tobacco  Co.  In  addition  to  a small  interest  in  the  Amsterdam 
Supply  Co.,  has  the  following  stock  interest  in  certain  defendants  : 

David  Dunlop  (plug).  Owns  3,000  of  4,500  shares. 

W.  S.  Mathews  & Sons  (smoking).  Owns  3,637  out  of  5,000  shares  of  stock. 

T.  C.  Williams  Co.  (plug).  Owns  all  of  stock,  4,000  shares. 


6 THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 

and  nature  of  the  American  Tobacco  Co.  and  the  origin  and  nature 
of  all  the  other  defendant  corporations,  whether  accessory  or  sub- 
sidiary, and  the  connection  of  the  individual  defendants  with  such 
corporations.  In  effect  the  bill  charged  that  the  individual  defend- 
ants and  the  defendant  corporations  were  engaged  in  a conspiracy  in 
restraint  of  interstate  and  foreign  trade  in  tobacco  and  the  products 
of  tobacco  and  constituted  a combination  in  restraint  of  such  trade, 
in  violation  of  the  first  section  of  the  act,  and  also  were  attempting 
to  monopolize  and  were  actually  a monopolization  of  such  trade,  in 
violation  of  the  second  section.  In  support  of  these  charges  general 
averments  were  made  in  the  bill  as  to  the  wrongful  purpose  and 
intent  with  which  acts  were  committed  which  it  was  alleged  brought 
about  the  alleged  wrongful  result. 

The  prayer  of  the  bill  was  as  follows: 

Wherefore  petitioner  prays: 

1.  That  the  contracts,  combinations,  and  conspiracies  in  restraint  of  trade 
and  commerce  among  the  States  and  with  foreign  nations,  together  with  the 
attempts  to  monopolize  and  the  monopolies  of  the  same  hereinbefore  described 
be  declared  illegal  and  in  violation  of  the  act  of  Congress  passed  July  2,  1890, 
and  subsequent  acts,  and  that  they  be  prevented  and  restrained  by  proper 
orders  of  the  court. 

2.  That  the  agreements,  contracts,  combinations,  and  conspiracies  entered 
into  by  the  defendants  on  or  about  September  27,  1902,  and  thereafter,  and  evi- 
denced among  other  things  by  the  two  written  agreements  of  that  date,  Exhibits 
1 and  2 hereto,  be  declared  illegal,  and  that  injunctions  issue  restraining  and 
prohibiting  defendants  from  doing  anything  in  pursuance  of  or  in  furtherance 
of  the  same  within  the  jurisdiction  of  the  United  States. 

3.  That  the  Imperial  Tobacco  Co.,  its  officers,  agents,  and  servants  be  en- 
joined from  engaging  in  interstate  or  foreign  trade  and  commerce  within  the 
jurisdiction  of  the  United  States  until  it  shall  cease  to  observe  or  act  in  pur- 
suance of  said  agreements,  contracts,  combinations,  and  conspiracies  entered 
into  by  it  and  other  defendants  on  or  about  September  27,  1902,  and  thereafter, 
and  evidenced  among  other  things  by  the  contracts  of  that  date,  Exhibits  1 
and  2 hereto. 

4.  That  the  British-American  Tobacco  Co.  be  adjudged  an  unlawful  instru- 
mentality created  solely  for  carrying  into  effect  the  objects  and  purposes  of 
said  contract,  combination,  and  conspiracy  entered  into  on  or  about  September 
27,  1902,  and  thereafter,  and  that  it  be  enjoined  from  engaging  in  interstate  or 
foreign  trade  and  commerce  within  the  jurisdiction  of  the  United  States. 

5.  That  the  court  adjudge  the  American  Tobacco  Co.,  the  American  Snuff 
Co.,  the  American  Cigar  Co.,  the  American  Stogie  Co.,  the  MacAndrews  & 
Forbes  Co.,  and  the  Conley  Foil  Co.  is  each  a combination  in  restraint  of  inter- 
state and  foreign  trade  and  commerce;  and  that  each  has  attempted  and  is 
attempting  to  monopolize,  is  in  combination  and  conspiracy  with  other  persons 
and  corporations  to  monopolize,  and  has  monopolized  part  of  the  trade  and  com- 
merce among  the  several  States  and  with  foreign  nations ; and  order  and  decree 
that  each  one  of  them  be  restrained  from  engaging  in  interstate  or  foreign 
commerce,  or,  if  the  court  should  be  of  opinion  that  the  public  interests  will 
be  better  subserved  thereby,  that  receivers  be  appointed  to  take  possession  of 
all  the  property,  assets,  business,  and  affairs  of  said  defendants  and  wind  up 
the  same,  and  otherwise  take  such  course  in  regard  thereto  as  will  bring 
about  conditions  in  trade  and  commerce  among  the  States  and  with  foreign 
nations  in  harmony  with  law. 

6.  That  the  holding  of  stock  by  one  of  the  defendant  corporations  in  another 
under  the  circumstances  shown  be  declared  illegal,  and  that  each  of  them  be 
enjoined  from  continuing  to  hold  or  own  such  shares  in  another  and  from 
exercising  any  right  in  connection  therewith. 

7.  That  defendants,  each  and  all,  be  enjoined  from  continuing  to  carry 
out  the  purposes  of  the  above-described  contracts,  combinations,  conspiracies, 
and  attempts  to  monopolize  by  the  means  herein  described,  or  by  any  other,  and 
be  required  to  desist  and  withdraw  from  all  connection  with  the  same. 

8.  That  each  of  the  defendants  be  enjoined  from  purchasing  leaf  tobacco  or 
from  selling  and  distributing  its  manufactured  output  as  a part  of  interstate 
and  foreign  trade  and  commerce  in  conjunction  or  combination  with  any  other 
defendant,  and  from  taking  part  or  being  interested  in  any  agreement  or  com- 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  7 

bination  intended  to  destroy  competition  among  them  in  reference  to  such 
purchases  or  sales. 

9.  That  petitioner  have  such  other,  further,  and  general  relief  as  may  be 
proper. 

As  to  the  answers,  it  suffices  to  say  that  all  the  individual  and  cor- 
porate defendants  other  than  the  foreign  corporations  denied  the 
charges  of  wrongdoing  and  illegal  combination,  and  the  corporate 
defendants  in  particular  in  addition  averred  their  right  under  State 
charters  by  virtue  of  which  they  existed  to  own  and  possess  the 
property  which  they  held,  and  further  averred  that  they  were  en- 
gaged in  manufacturing,  and  that  any  combination  amongst  them 
related  only  to  that  subject,  and  therefore  was  not  within  the  anti- 
trust act.  The  two  foreign  corporations  asserted  the  validity  of  their 
corporate  organizations  and  of  the  assailed  agreements,  and  denied 
any  participation  in  the  alleged  wrongful  combination. 

After  the  taking  of  much  testimony  before  a special  examiner  the 
case  was  heard  before  a court  consisting  of  four  judges,  constituted 
under  the  expediting  act  of  February  11, 1903.  In  deciding  the  case  in 
favor  of  the  Government,  each  of  the  four  judges  delivered  an  opin- 
ion. (164  Fed.,  700.)  A final  decree  was  entered  on  December  15, 
1908.  The  petition  was  dismissed  as  to  the  English  corporations, 
three  of  the  subsidiary  corporations,  the  United  Cigar  Stores  Co., 
and  all  the  individual  defendants.  It  was  decreed  that  the  defend- 
ants other  than  those  against  whom  the  petition  was  dismissed  had 
theretofore  entered  into  and  were  parties  to  combinations  in  restraint 
of  trade,  etc.,  in  violation  of  the  antitrust  act,  and  said  defendants 
and  each  of  them,  their  officers,  agents,  etc.,  were  restrained  and 
enjoined  “ from  directly  or  indirectly  doing  any  act  or  thing  what- 
soever in  furtherance  of  the  objects  and  purposes  of  said  combina- 
tions, and  from  continuing  as  parties  thereto.”  It  specifically  found 
that  each  of  the  defendants  “the  American  Tobacco  Co.,  American 
Snuff  Co.,  American  Cigar  Co.,  American  Stogie  Co.,  and  Mac  An- 
drews & Forbes  Co.,  constitutes  and  is  itself  a combination  in  violation 
of  the  said  act  of  Congress.”  The  corporations  thus  named,  their 
officers,  etc.,  were  next  restrained  and  enjoined  “ from  further  directly 
or  indirectly  engaging  in  interstate  or  foreign  trade  and  commerce 
in  leaf  tobacco,  or  the  products  manufactured  therefrom,  or  articles 
necessary  or  useful  in  connection  therewith.  But  if  any  of  said  last- 
named  defendants  can  hereafter  affirmatively  show  the  restoration 
of  reasonably  competitive  conditions,  such  defendant  may  apply  to 
this  court  for  a modification,  suspension,  or  dissolution  of  the  injunc- 
tion herein  granted  against  it.”  The  decree  then  enumerated  the 
various  corporations  which  it  was  found  held  or  claimed  to  own  some 
or  all  of  the  capital  stock  of  other  corporations,  and  particularly 
specified  such  other  corporations,  and  then  made  the  following  re- 
straining provisions: 

Wherefore  each  and  all  of  defendants,  the  American  Tobacco  Co.,  the  American 
Snuff  Co.,  the  American  Cigar  Co.,  P.  Lorillard  Co.,  R.  J.  Reynolds  Tobacco  Co., 
Blackwell’s  Durham  Tobacco  Co.,  and  Conley  Foil  Co.,  their  officers,  directors, 
agents,  servants,  and  employees,  are  hereby  restrained  and  enjoined  from  ac- 
quiring, by  conveyance  or  otherwise,  the  plant  or  business  of  any  such  corpora- 
tion wherein  any  one  of  them  now  holds  or  owns  stock ; and  each  and  all  of 
said  defendant  corporations  so  holding  stock  in  other  corporations,  as  above 
specified,  their  officers,  directors,  agents,  servants,  and  employees,  are  further 


8 THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 

enjoined  from  voting  or  attempting  to  vote  said  stock  at  any  meeting  of  the 
stockholders  of  the  corporation  issuing  the  same  and  from  exercising  or  attempt- 
ing to  exercise  any  control,  direction,  supervision,  or  influence  whatsoever  over 
the  acts  and  doings  of  such  corporation.  And  it  is  further  ordered  and  decreed 
that  each  and  every  of  the  defendant  corporations  the  stock  of  which  is  held 
by  any  other  defendant  corporation  as  hereinbefore  shown,  their  officers,  di- 
rectors, servants,  and  agents,  be  and  they  are  hereby  respectively  and  collec- 
tively restrained  and  enjoined  from  permitting  the  stock  so  held  to  be  voted  by 
any  other  defendant  holding  or  claiming  to  own  the  same  or  by  its  attorneys  or 
agents  at  any  corporate  election  for  directors  or  officers  and  from  permitting  or 
suffering  any  other  defendant  corporation  claiming  to  own  or  hold  stock  therein, 
or  its  officers  or  agents,  to  exercise  any  control  whatsoever  over  its  corporate 
acts. 

Judgment  for  costs  was  given  in  favor  of  the  petitioner  and  against 
the  defendants  as  to  whom  the  petition  had  not  been  dismissed,  ex- 
cept the  R.  P.  Richardson,  Jr.,  & Co.,  a corporation,  which  had  con- 
sented to  the  decree.  The  decree  also  contained  a provision  that  the 
defendants  or  any  of  them  should  not  be  prevented  “ from  the  insti- 
tution, prosecution,  or  defense  of  any  suit,  action,  or  proceeding  to 
prevent  or  restrain  the  infringement  of  a trade-mark  used  in  inter- 
state commerce  or  otherwise  assert  or  defend  a claim  to  any  property 
or  rights.”  In  the  event  of  a taking  of  an  appeal  to  this  court,  the 
decree  provided  that  the  injunction  which  it  directed  “ shall  be  sus- 
pended during  the  pendency  of  such  appeal.”. 

The  United  States  appealed,  as  did  also  the  various  defendants 
against  whom  the  decree  was  entered.  For  the  Government  it  is 
contended : 

1.  That  the  petition  should  not  have  been  dismissed  as  to  the  indi- 
vidual defendants. 

2.  That  it  should  not  have  been  dismissed  as  to  the  two  foreign 
corporations — the  Imperial  Tobacco  Co.  and  the  British- American 
Tobacco  Co.  and  the  domestic  corporations  controlled  by  the  latter — 
and  that,  on  the  contrary,  the  decree  should  have  commanded  the 
observance  of  the  antitrust  act  by  the  foreign  corporations  so  far  as 
their  dealings  in  the  United  States  were  concerned,  and  should  have 
restrained  those  companies  from  doing  any  act  in  the  United  States 
in  violation  of  the  antitrust  act,  whether  or  not  the  right  to  do  said 
acts  was  asserted  to  have  arisen  pursuant  to  the  contracts  made  out- 
side of  or  within  the  United  States. 

3.  The  petition  should  not  have  been  dismissed  as  to  the  United 
Cigar  Stores  Co. 

4.  The  final  decree  should  have  adjudged  defendants  parties  to 
unlawful  contracts  and  conspiracies. 

5.  The  final  decree  should  have  adjudged  that  defendants  were 
attempting  to  monopolize  and  had  monopolized  parts  of  commerce. 
More  particularly,  it  is  urged,  it  should  have  adjudged  that  the 
American  Tobacco  Co.,  American  Snuff  Co.,  American  Cigar  Co., 
American  Stogie  Co.,  MacAndrews  & Forbes  Co.,  the  Conley  Foil 
Co.,  and  the  British-American  Tobacco  Co.  were  severally  attempt- 
ing to  monopolize  and  had  monopolized  parts  of  commerce,  and  that 
appropriate  remedies  should  have  been  applied. 

6.  The  decree  was  not  sufficiently  specific,  since  it  should  have  de- 
scribed with  more  particularity  the  methods  which  the  defendants 
had  followed  in  forming  and  carrying  out  their  unlawful  purpose, 
and  should  have  prohibited  the  resort  to  similar  methods. 


THE  AMERICAN  TOBACCO  CO.  ET  AU.  V.  THE  UNITED  STATES.  9 

7.  The  decree  should  have  specified  the  shares  in  corporations 
disclosed  by  the  evidence  to  be  ownedi  by  the  parties  to  the  con- 
spiracy, and  should  have  enjoined  those  parties  from  exercising 
any  control  over  the  corporations  in  which  such  stock  was  held,  and 
the  latter,  if  made  defendant,  from  permitting  such  control,  and 
should  have  also  enjoined  the  collecting  of  any  dividends  upon  the 
stock. 

8.  The  decree  improperly  provided  that  nothing  therein  should 
prevent  defendants  from  prosecuting  or  defending  suits;  also  im- 
properly suspended  the  injunction  pending  appeal. 

The  defendants,  by  their  assignments  of  errors,  complain  because 
the  petition  was  not  dismissed  as  to  all,  and  more  specifically  (a) 
because  they  were  adjudged  parties  to  a combination  in  restraint  of 
interstate  and  foreign  commerce,  and  enjoined  accordingly;  ( b ) 
because  certain  defendant  corporations  holding  shares  in  others  were 
enjoined  from  voting  them  or  exercising  control  over  the  issuing 
company,  and  the  latter  from  permitting  this;  and  (c)  because  the 
American  Tobacco  Co.,  American  Snuff  Co.,  American  Cigar  Co., 
American  Stogie  Co.,  and  the  MacAndrews  & Forbes  Co.  were  ad- 
judged unlawful  combinations  and  restrained  from  engaging  in 
interstate  and  foreign  commerce. 

The  elaborate  arguments  made  by  both  sides  at  bar  present  in 
many  forms  of  statement  the  conflicting  contentions  resulting  from 
the  nature  and  character  of  the  suit  and  the  defense  thereto,  the 
decree  of  the  lower  court,  and  the  propositions  assigned  as  error  to 
which  we  have  just  referred.  In  so  far  as  all  or  any  of  these  con- 
tentions, as  many  of  them  in  fact  do,  involve  a conflict  as  to  the  appli- 
cation and  effect  of  sections  1 and  2 of  the  antitrust  act,  their  consid- 
eration has  been  greatly  simplified  by  the  analysis  and  review  of  that 
act  and  the  construction  affixed  to  the  sections  in  question  in  the  case 
of  Standard  Oil  Company  et  al.  v.  United  States,  quite  recently 
decided.  In  so  far  as  the  contentions  relate  to  the  disputed  proposi- 
tions of  fact,  we  think,  from  the  view  which  we  take  of  the  case,  they 
need  not  be  referred  to,  since  in  our  opinion  the  case  can  be  disposed 
of  by  considering  only  those  facts  which  are  indisputable  and  by  ap- 
plying to  the  inferences  properly  deducible  from  such  facts  the  mean- 
ing and  effect  of  the  law  as  expounded  in  accordance  with  the  pre- 
vious decisions  of  this  court. 

We  shall  divide  our  investigation  of  the  case  into  three  subjects: 
First,  the  undisputed  facts;  second,  the  meaning  of  the  antitrust 
law  and  its  application  as  correctly  construed  to  the  ultimate  conclu- 
sions of  fact  deducible  from  the  proof;  third,  the  remedies  to  be 

applied. 


UNDISPUTED  FACTS. 

The  matters  to  be  considered  under  this  heading,  we  think,  can  best 
be  made  clear  by  stating  the  merest  outline  of  the  condition  of  the 
tobacco  industry  prior  to  what  is  asserted  to  have  been  the  initial 
movement  in  the  combination  which  the  suit  assails,  and  in  the  light 
so  afforded  to  briefly  recite  the  history  of  the  assailed  acts  and  con- 
tracts. We  shall  divide  the  subject  into  two  periods,  (a)  the  one 
from  the  time  of  the  organization  of  the  first  or  old  American  To- 


10  THE  AMEKICAN  TOBACCO  CO.  ET  AL.  Y.  THE  UNITED  STATES. 


bacco  Co.,  in  1890,  to  the  organization  of  the  Continental  Tobacco 
Co.,  and  (b)  from  the  date  of  such  organization  to  the  filing  of  the 
bill  in  this  case. 

Summarizing  in  the  broadest  way  the  conditions  which  obtained 
prior  to  1890,  as  to  the  production,  manufacture,  and  distribution  of 
tobacco,  the  following  general  facts  are  adequate  to  portray  the 
situation : 

Tobacco  was  grown  in  many  sections  of  the  country  having  diver- 
sity of  soil  and  climate,  and  therefore  was  subject  to  various  vicis- 
situdes resulting  from  the  places  of  production,  and  consequently 
varied  in  quality.  The  great  diversity  of  use  to  which  tobacco  was 
applied  in  manufacturing  caused  it  to  be  that  there  was  a demand 
for  all  the  various  qualities.  The  demand  for  all  qualities  was  not 
local,  but  widespread,  extending  as  well  to  domestic  as  to  foreign 
trade,  and  therefore  all  the  products  were  marketed  under  competi- 
tive conditions  of  a peculiarly  advantageous  nature.  The  manu- 
facture of  the  product  in  this  country  in  various  forms  was 
successfully  carried  on  by  many  individuals  or  concerns  scattered 
throughout  the  country,  a large  number,  perhaps,  of  the  manu- 
facturers being  in  the  vicinage  of  production  and  others  being 
advantageously  situated  in  or  near  the  principal  markets  of  dis- 
tribution. 

Before  January,  1890,  five  distinct  concerns — Allen  & Ginter,  with 
factory  at  Richmond,  Va. ; W.  Duke,  Sons  & Co.,  with  factories  at 
Durham,  N.  C.,  and  New  York  City ; Kinney  Tobacco  Co.,  with  fac- 
tory at  New  York  City;  W.  S.  Kimball  & Co.,  with  factory  at  Roch- 
ester, N.  Y. ; Goodwin  & Co.,  with  factory  at  Brooklyn,  N.  Y. — manu- 
factured, distributed,  and  sold  in  the  United  States  and  abroad  95 
per  cent  of  all  the  domestic  cigarette  and  less  than  8 per  cent  of  the 
smoking  tobacco  produced  in  the  United  States.  There  is  no  doubt 
that  these  factories  were  competitors  in  the  purchase  of  the  raw  prod- 
uct which  they  manufactured  and  in  the  distribution  and  sale  of  the 
manufactured  products.  Indeed,  it  is  shown  that  prior  to  1890  not 
only  had  normal  and  ordinary  competition  existed  between  the  fac- 
tories in  question,  but  that  the  competition  had  been  fierce  and  abnor- 
mal. In  January,  1890,  having  agreed  upon  a capital  stock  of 
$25,000,000,  all  to  be  divided  amongst  them,  and  who  should  be  direc- 
tors, the  concerns  referred  to  organized  the  American  Tobacco  Co.  in 
New  Jersey  “ for  trading  and  manufacturing,”  with  broad  powers, 
and  conveyed  to  it  the  assets  and  businesses,  including  good  will  and 
right  to  use  the  names  of  the  old  concerns;  and  thereafter  this  corpo- 
ration carried  on  the  business  of  all.  The  $25,000,000  of-  stock  of  the 
tobacco  company  was  allotted  to  the  charter  members  as  follows: 
Allen  & Ginter,  $3,000,000  preferred,  $4,500,000  common;  W.  Duke, 
Sons  & Co.,  $3,000,000  preferred,  $4,500,000  common;  Kinney  Tobacco 
Co.,  $2,000,000  preferred,  $3,000,000  common;  W*  S.  Kimball  & Co., 
$1,000,000  preferred,  $1,500,000  common;  and  Goodwin  & Co., 
$1,000,000  preferred,  $1,500,000  common. 

There  is  a charge  that  the  valuation  at  which  the  respective 
properties  were  capitalized  in  the  new  corporation  was  enormously 
in  excess  of  their  actual  value.  We,  however,  put  that  subject 
aside,  since  we  propose  only  to  deal  with  facts  which  are  not  in 
controversy. 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  11 

Shortly  after  the  formation  of  the  new  corporation  the  Goodwin 
& Co.  factory  was  closed,  and  the  directors  ordered  “ that  the  manu- 
facture of  all-tobacco  cigarettes  be  concentrated  at  Richmond.”  The 
new  corporation,  in  1890,  the  first  year  of  its  operation,  manufac- 
tured about  2,500,000,000  cigarettes,  that  is  about  96  or  97  per  cent 
of  the  total  domestic  output,  and  about  5,500,000  pounds  of  smok- 
ing tobacco  out  of  a total  domestic  product  of  nearly  70,000,000 
pounds. 

In  a little  over  a year  after  the  organization  of  the  company  it 
increased  its  capital  stock  by  $10,000,000.  The  purpose  of  this  in- 
crease is  inferable  from  the  considerations  which  we  now  state. 

There  was  a firm  known  as  Pfingst,  Doerhoefer  & Co.,  consisting  of 
a number  of  partners,  who  had  been  long  and  successfully  carrying  on 
the  business  of  manufacturing  plug  tobacco  in  Louisville,  Ky.,  and' 
distributing  it  through  the  channels  of  interstate  commerce.  In 
January,  1891,  this  firm  was  converted  into  a corporation  known  as 
the  National  Tobacco  Works,  having  a capital  stock  of  $400,000,  all 
of  which  was  issued  to  the  partners.  Almost  immediately  thereafter, 
in  the  month  of  F ebruary , the  American  Tobacco  Co.  became  the  pur- 
chaser of  all  the  capital  stock  of  the  new  corporation,  paying  $600,000 
cash  and  $1,200,000  in  stock  of  the  American  Tobacco  Co.  The  mem- 
bers of  the  previously  existing  firm  bound  themselves  by  contract  with 
the  American  Tobacco  Co.’ to  enter  its  service  and  manage  the  busi- 
ness and  property  sold,  and  each  further  agreed  that  for  10  years  he 
would  not  engage  in  carrying  on,  directly  or  indirectly,  or  permit  or 
suffer  the  use  of  his  name  in  connection  with  the  carrying  on  of  the 
tobacco  business  in  any  form. 

In  April  following  the  American  Tobacco  Co.  bought  out  the  busi- 
ness of  Philip  Whitlock,  of  Richmond,  Va.,  who  was  engaged  in  the 
manufacture  of  cheroots  and  cigars,  and  with  the  exclusive  right  to 
use  the  name  of  Whitlock.  The  consideration  for  this  purchase  was 
$300,000,  and  Whitlock  agreed  to  become  an  employee  of  the  American 
Tobacco  Co.  for  a number  of  years  and  not  to  engage  for  20  years  in 
the  tobacco  business. 

In  the  month  of  April  the  American  Tobacco  Co.  also  acquired  the 
business  of  Marburg  Bros.,  a well-known  firm  located  at  Baltimore, 
Md.,  and  engaged  in  the  manufacture  and  distribution  of  tobacco, 
principally  smoking  and  snuff.  The  consideration  was  a cash  pay- 
ment of  $164,637.65  and  stock  to  the  amount  of  $3,075,000.  The 
members  of  the  firm  also  conveyed  the  right  to  the  use  of  the  firm 
name  and  agreed  not  to  engage  in  the  tobacco  business  for  a lengthy 
period. 

Again,  in  the  same  month,  the  American  Tobacco  Co.  bought  out  a 
tobacco  firm  of  old  standing,  also  located  in  Baltimore,  as  G.  W.  Gail 
& Ax,  engaged  principally  in  manufacturing  and  selling  smoking 
tobacco,  buying  with  the  business  the  exclusive  right  to  use  the  name 
of  the  firm  or  the  partners,  and  the  members  of  the  firm  agreed  not 
to  engage  in  the  tobacco  business  for  a specified  period.  The 
consideration  for  this  purchase  was  $77,582.66  in  cash  and 
stock  to  the  amount  of  $1,760,000.  The  plant  was  abandoned  soon 
after. 

The  result  of  these  purchases  was  manifested  at  once  in  the  product 
of  the  company  for  the  year  18-91,  as  will  appear  from  a note  in  the 


12  THE  AMEBICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 

margin.1  It  will  be  seen  that  as  to  cheroots,  smoking  tobacco,  fine-cut 
tobacco,  snuff,  and  plug  tobacco,  the  company  had  become  a factor  in 
all  branches  of  the  tobacco  industry. 

Kef  erring  to  the  occurrences  of  the  year  1891  as  in  all  respects 
typical  of  the  occurrences  which  took  place  in  all  the  other  years  of 
the  first  period,  that  is,  during  the  years  1892,  1893,  1894,  1895,  1896, 
1897,  and  1898,  we  content  ourselves  with  saying  that  it  is  undisputed 
that  between  February,  1891,  and  October,  1898,  including  the  pur- 
chases which  we  have  specifically  referred  to,  the  American  Tobacco 
Co.  acquired  15  going  tobacco  concerns  doing  business  in  the  States 
of  Kentucky,  Louisiana,  Maryland,  Michigan,  Missouri,  New  York, 
North  Carolina,  and  Virginia.  For  10  of  the  plants  an  all-cash  con- 
sideration of  $6,410,235.26  was  paid,  while  the  payments  for  the  re- 
maining 5 aggregated  in  cash  $1,115,100.95  and  in  stock  $4,123,000. 
It  is  worth  noting  that  the  last  purchase,  in  October,  1898,  was  of  the 
Drummond  Tobacco  Co.,  a Missouri  corporation  dealing  principally 
in  plug,  for  which  a cash  consideration  was  paid  of  $3,457,500. 

The  corporations  which  were  combined  for  the  purpose  of  forming 
the  American  Tobacco  Co.  produced  a very  small  portion  of  plug 
tobacco.  That  an  increase  in  this  direction  was  contemplated  is  mani- 
fested by  the  almost  immediate  increase  of  the  stock  and  its  use  for 
the  purpose  of  acquiring,  as  we  have  indicated,  in  1891  and  1892,  the 
ownership  and  control  of  concerns  manufacturing  plug  tobacco  and 
the  consequent  increase  in  that  branch  of  production.  There  is  no 
dispute  that  as  early  as  1893  the  president  of  the  American  Tobacco 
Co.,  by  authority  of  the  corporation,  approached  leading  manufac- 
turers of  plug  tobacco  and  sought  to  bring  about  a combination  of 
the  plug-tobacco  interests,  and  upon  the  failure  to  accomplish  this 
ruinous  competition  by  lowering  the  price  of  plug  below  its  cost 
ensued.  As  a result  of  this  warfare,  which  continued  until  1898,  the 
American  Tobacco  Co.  sustained  severe  losses  aggregating  more  than 
$4,000,000.  The  warfare  produced  its  natural  result,  not  only  because 
the  company  acquired  during  the  last  two  years  of  the  campaign,  as 
we  have  stated,  control  of  important  plug-tobacco  concerns,  but  others 
engaged  in  that  industry  came  to  terms.  We  say  this,  because  in  1898, 
in  connection  with  several  leading  plug  manufacturers,  the  American 
Tobacco  Co.  organized  a New  Jersey  corporation  styled  the  Conti- 
nental Tobacco  Co.,  for  “ trading  and  manufacturing,”  with  a capital 
of  $75,000,000,  afterwards  increased  to  $100,000,000.  The  new  com- 
pany issued  its  stock  and  took  transfers  to  the  plants,  assets,  and 


i The  output  of  the  American  Tobacco  Co.  for  1891  was: 


Number. 

Pounds. 

2,788,778,000 

40,009,000 

13,813,355 
560,633 
383, 162 
4, 442, 774 

Total  output  for  the  United  States,  1891: 

3,137,318,596 

76,708,300 

16,968,870 

166,177,915 

10,674,241 

Snuff 

THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  13 

businesses  of  five  large  and  successful  competing  plug  manufac- 
turers.1 

The  American  Tobacco  Co.  also  conveyed  to  this  corporation,  at 
large  valuations,  the  assets,  brands,  real  estate,  and  good  will  per- 
taining to  its  plug-tobacco  business,  including  the  National  Tobacco 
Works,  the  James  G.  Butler  Tobacco  Co.,  Drummond  Tobacco  Co., 
and  Brown  Tobacco  Co.,  receiving  as  consideration  $30,274,200  of 
stock  (one-half  common  and  one-half  preferred),  $300,000  cash,  and 
an  additional  sum  for  losses  sustained  in  the  plug  business  during 
1898,  $840,035.  Mr.  Duke,  the  president  of  the  American  Tobacco 
Co.,  also  became  president  of  the  Continental  Co. 

Under  the  preliminary  agreement  which  was  made,  looking  to  the 
formation  of  the  Continental  Tobacco  Co.,  that  company  acquired 
from  the  holders  all  the  $3,000,000  of  the  common  stock  of  the  P. 
Lorillard  Co.  in  exchange  for  $6,000,000  of  its  stock,  and  $1,581,300 
of  the  $2,000,000  preferred  in  exchange  for  notes  aggregating  a sum 
considerably  larger.  The  Lorillard  Co.,  however,  although  it  thus 
passed  practically  under  the  control  of  the-  American  Tobacco  Co. 
by  virtue  of  its  ownership  of  stock  in  the  Continental  Co.,  was  not 
liquidated,  but  its  business  continued  to  be  conducted  as  a distinct 
corporation,  its  goods  being  marked  and  put  upon  the  market,  just 
as  if  they  were  the  manufacture  of  an  independent  concern. 

Following  the  organization  of  the  Continental  Tobacco  Co.,  the 
American  Tobacco  Co.  increased  its  capital  stock  from  $35,000,000 
to  $70,000,000  and  declared  a stock  dividend  of  100  per  cent  on  its 
common  stock,  that  is,  a stock  dividend  of  $21,000,000. 

As  the  facts  just  stated  bring  us  to  the  end  of  the  first  period  which 
at  the  outset  we  stated  it  was  our  purpose  to  review,  it  is  well  briefly  to 
point  out  the  increase  in  the  power  and  control  of  the  American  To- 
bacco Co.  and  the  extension  of  its  activities  to  all  forms  of  tobacco 
products  which  had  been  accomplished  just  prior  to  the  organization 
of  the  Continental  Tobacco  Co.  Nothing  could  show  it  more  clearty 
than  the  following:  At  the  end  of  the  time  the  company  was  manu- 
facturing 86  per  cent  or  thereabouts  of  all  the  cigarettes  produced  in 
the  United  States,  above  26  per  cent  of  all  the  smoking  tobacco,  more 
than  22  per  cent  of  all  plug  tobacco,  51  per  cent  of  all  little  cigars, 
6 per  cent  each  of  all  snuff  and  fine-cut  tobacco,  and  over  2 per  cent 
of  all  cigars  and  cheroots. 

A brief  reference  to  the  occurrences  of  the  second  period,  that  is, 
from  and  after  the  organization  of  the  Continental  Tobacco  Co.  up 
to  the  time  of  the  bringing  of  this  suit,  will  serve  to  make  evident  that 
the  transactions  in  their  essence  had  all  the  characteristics  of  the  oc- 
currences of  the  first  period. 

In  the  year  1899  and  thereafter  either  the  American  or  Continental 
Co.,  for  cash  or  stock,  at  an  aggregate  cost  of  $50,000,000,  bought 
and  closed  up  some  30  competing  corporations  and  partnerships 


1 P.  J.  Sorg  Co.,  having  factory  at  Middletown,  Ohio,  who  received  preferred  stock 
$4,350,000,  common  stock  $4,525,000,  and  cash  $224,375. 

John  Finzer  & Bros.,  having  factory  at  Louisville,  Ky.,  who  received  preferred  stock 
$2,250,000,  common  stock  $3,050,000,  and  cash  $550,000. 

Daniel  Scotten  & Co.,  having  factory  at  Detroit,  Mich.,  who  received  preferred  stock 
$1,911,100  and  common  stock  $3,012,500. 

I’.  H.  Mayo  & Bros.,  having  factory  at  Richmond,  Va.,  who  received  preferred  stock 
$1,250,000,  common  stock  $1,925,000,  and  cash  $00,125. 

John  Wright  Co.,  having  factory  at  Richmond,  Va.,  who  received  preferred  stock 
$495,000,  common  stock  $495,000,  and  cash  $4,116.67. 


14  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 

theretofore  engaged  in  interstate  and  foreign  commerce  as  manufac- 
turers, sellers,  and  distributors  of  tobacco  and  related  commodities, 
the  interested  parties  covenanting  not  to  engage  in  the  business. 
Likewise  the  two  corporations  acquired  for  cash,  by  issuing  stock,  and 
otherwise,  control  of  many  competing  corporations,  now  going  con- 
cerns, with  plants  in  various  States,  Cuba  and  Porto  Pico,  which 
manufactured,  bought,  sold,  and  distributed  tobacco  products  or 
related  articles  throughout  the  United  States  and  foreign  countries, 
and  took  from  the  parties  in  interest  covenants  not  to  engage  in  the 
tobacco  business. 

The  plants  thus  acquired  were  operated  until  the  merger  in  1904, 
to  which  we  shall  hereafter  refer,  as  a part  of  the  general  system  of 
the  American  and  Continental  Cos.  The  power  resulting  from  and 
the  purpose  contemplated  in  making  these  acquisitions  by  the  com- 
panies just  referred  to,  however,  may  not  be  measured  by  considering 
alone  the  business  of  the  company  directly  acquired,  since  some  of 
those  companies  Avere  made  the  vehicles  as  representing  the  American 
or  Continental  Co.  for  acquiring  and  holding  the  stock  of  other  and 
competing  companies,  thus  amplifying  the  power  resulting  from  the 
acquisitions  directly  made  by  the  American  or  Continental  Co.,  with- 
out ostensibly  doing  so.  It  is,  besides,  undisputed  that  in  many  in- 
stances the  acquired  corporations  with  the  subsidiary  companies  over 
which  they  had  control  through  stock  ownership  were  carried  on 
ostensibly  as  independent  concerns  disconnected  from  either  the 
American  or  the  Continental  Co.,  although  they  were  controlled  and 
OAvned  by  one  or  the  other  of  these  companies.  Without  going  into 
details  on  these  subjects,  for  the  sake  of  brevity,  we  append  in 
the  margin  a statement  of  the  corporations  thus  acquired,  Avith 
the  mention  of  the  competing  concerns  which  such  corporations 
acquired.1 


1 Monopol  Tobacco  Works  (New  York,  N.  Y.).  Capital,  $40,000;  cigarettes  and  smoking 
tobacco.  In  1899  the  American  Tobacco  Co.  acquired  all  the  shares  for  $250,000,  and  it 
is  now  a selling  agency. 

Luhrman  & AATilbern  Tobacco  Co.  (Middletown,  Ohio).  Capital,  $900,000;  scrap  to- 
bacco. This  business  was  formerly  carried  on  by  a partnership. 

Mengel  Box  Co.  (Louisville,  Ky.).  Capital,  $2,000,000;  boxes  for  packing  tobacco. 
This  company  has  acquired  the  stock  ($150,000)  of  Columbia  Box  Co.  and  of  Tyler  Box 
Co.  ($25,000),  both  at  St.  Louis. 

The  Porto  Rican-American  Tobacco  Co.  (Porto  Rico).  Capital,  $1,799,600.  In  1899 
the  American  Co.  caused  the  organization  of  the  Porto  Rican-American  Tobacco  Co.,  which 
took  over  the  partnership  business  of  Rucabado  y Portela,  manufacturer  of  cigars  and 
cigarettes,  with  covenants  not  to  compete.  The  American  Tobacco  Co.  and  American 
Cigar  Co.  each  hold  $585,300  of  the  stock  ; the  balance  is  in  the  hands  of  individuals. 

Kentucky  Tobacco  Product  Co.  (Louisville,  Ky.).  Capital,  $1,000,000.  In  1899  the 
Continental  Co.  acquired  control  of  the  Louisville  Spirit-Cured  Tobacco  Co.,  engaged  in 
curing  and  treating  tobacco  and  utilizing  the  stems  for  fertilizers.  By  agreement,  the 
Kentucky  Tobacco  Product  Co.  was  organized  in  New  Jersey,  with  $1,000,000  capital, 
$450,000  issued  to  the  old  stockholders  and  $550,000  to  Continental  Co.,  as  consideration 
for  agreement  to  supply  stems. 

Golden  Belt  Manufacturing  Co.  (North  Carolina).  Capital,  $700,000;  cotton  bags  and 
containers.  In  1899  the  American  Tobacco  Co.  acquired  the  business  of  this  corporation, 
which  was  formed  to  take  over  a going  business. 

The  Conley  Foil  Co.  (New  York).  Capital,  $825,000;  tinfoil  combination.  In  Decem- 
ber, 1899,  the  American  Tobacco  Co.  secured  control  of  the  business  of  John  Conley  & Son 
(partnership),  New  York,  N.  Y.,  manufacturers  of  tinfoil,  an  essential  for  packing  tobacco 
products.  By  agreement  the  Conley  Foil  Co.  was  incorporated  in  New  Jersey  “ for  trad- 
ing and  manufacturing,”  etc.,  with  $250,000  capital  (afterwards  $375,000  and  $825,000), 
which  took  over  the  firm’s  business  and  assets,  etc.,  and  the  American  Tobacco  Co.  be- 
came owner  of  the  majority  shares.  The  Conley  Foil  Co.  has  acquired  all  the  stock  of  the 
Johnson  Tinfoil  & Metal  Co. — a defendant — of  St.  Louis,  a leading  competitor,  and  they 
supply  under  fixed  contracts  the  tinfoil  used  by  defendants. 

R.  J.  Reynolds  Tobacco  Co.  (Winston  Salem,  N.  C.).  In  1899  the  Continental  Tobacco 
Co.  acquired  control  of  the  R.  J.  Reynolds  Tobacco  Co.,  one  of  the  largest  manufacturers 
of  plug — output  in  1898,  6,000,000  pounds.  By  agreement,  a new  corporation  (with  same 
name)  was  organized  in  New  Jersey  and  capitalized  at  $5,000,000  (afterwards  $7,525,000), 
which  took  over  the  business  and  assets  of  the  old  one.  The  Continental  Co.  immediately 
acquired  the  majority  shares  and  the  American  Co.  now  holds  $5,000,000  of  stock.  The 
separate  organization  has  been  preserved. 


THE  AMERICAN  TOBACCO  CO.  ET  AH.  V.  THE  UNITED  STATES.  15 

It  is  of  the  utmost  importance  to  observe  that  the  acquisitions  made 
by  the  subsidiary  corporations  in  some  cases  likewise  show  the  re- 
markable fact  stated  above;  that  is,  the  disbursement  of  enormous 
amounts  of  money  to  acquire  plants,  which  on  being  purchased  were 
not  utilized  but  were  immediately  closed.  It  is  also  to  be  remarked, 
that  the  facts  stated  in  the  memorandum  in  the  margin  show  on  their 
face  a singular  identity  between  the  conceptions  which  governed  the 
transactions  of  this  latter  period  with  those  which  evidently  existed 
at  the  very  birth  of  the  original  organization  of  the  American 
Tobacco  Co.,  as  exemplified  by  the  transactions  in  the  first  period. 
A statement  of  particular  transactions  outside  of  those  previously 
referred  to  as  having  occurred  during  the  period  in  question  will  serve 
additionally  to  make  the  situation  clear.  And  to  accomplish  this  -pur- 
pose we  shall,  as  briefly  as  may  be  consistent  with  clarity,  separately 
refer  to  the  facts  concerning  the  organization  during  the  second 
period  of  the  five  corporations  which  were  named  as  defendants  in 
the  bill,  as  heretofore  stated  and  which  for  the  purpose  of  designation 
we  have  hitherto  classified  as  accessory  defendants,  such  corporations 
being  the  American  Snuff  Co.,  American  Cigar  Co.,  American  Stogie 
Co.,  MacAndrews  & Forbes  Co.  (licorice),  and  Conley  Foil  Co. 

(1)  The  American  Snuff  Go. — As  we  have  seen,  the  American  To- 
bacco Co.  at  the  commencement  of  the  first  period  produced  a very 
small  quantity  of  snuff.  Its  capacity,  however,  in  that  regard  was 
augmented  owing  particularly  to  the  formation  of  the  Continental 
Tobacco  Co.  and  the  acquisition  of  the  Lorillard  Co.,  by  which  it 
came  to  be  a serious  factor  as  a snuff  producer.  There  shortly  en- 
sued an  aggressive  competition  in  the  snuff  business  between  the 
American  Tobacco  Co.,  with  the  force  acquired  from  the  vantage 
ground  resulting  from  the  dominancy  of  its  expanded  organization, 
and  others  in  the  trade  operating  independently  of  that  organization. 
The  result  was  identical  with  that  which  had  previously  arisen  from 
like  conditions  in  the  past. 


There  was  acquired  in  the  name  of  the  new  Reynolds  Co.,  with  covenants  against  com- 
petition, the  following  plants  : 

In  1900,  T.  L.  Vaughn  & Co.,  partnership,  of  Winston,  N.  C. ; consideration,  $90,506  ; 
Brown  Bros.  Co.,  a North  Carolina  corporation,  Winston,  N.  C.  ; consideration,  $67,615; 
and  P.  H.  Ilanes  & Co.  and  B.  F.  Hanes  & Co.,  Winston,  N.  C.,  partnership  ; considera- 
tion, $671,950. 

In  1905,  Rucker  & Witten  Tobacco  Co.,  Martinsville,  Va. ; consideration,  $512,898. 

In  1906,  1).  II.  Spencer  & Co.,  Martinsville,  Va.  ; consideration,  $314,255. 

(All  of  the  foregoing  plants  were  closed  as  soon  as  purchased.) 

A majority  of  the  $400,000  capital  stock  in  the  Lipfert-Scales  Co.,  of  Winston,  N.  C., 
a corporation  largely  engaged  in  the  manufacture  of  plug  tobacco  and  interstate  and 
foreign  commerce  in  leaf  tobacco  and  its  products,  was  acquired  by  the  Reynolds  Co. 
The  separate  organization  of  the  Lipfert-Scales  Co.  is  preserved  and  the  business  carried 
on  under  its  corporate  name. 

The  R.  .T.  Reynolds  Tobacco  Co.  also  holds  $98,300  stock  of  the  MacAndrews  & Forbes 
Co.  and  $9,600  of  the  Amsterdam  Supply  Co. 

Blackwell’s  Durham  Tobacco  Co.  (Durham,  N.  C.).  Capital,  $1,000,000.  In  1899  the 
American  Tobacco  Co.  procured  for  $4,000,000  all  the  stock  of  Blackwell’s  Durham  To- 
bacco Co.  at  Durham,  N.  C.,  manufacturer  and  distributor  of  tobacco  products.  There- 
upon the  Blackwell’s  Durham  Tobacco  Co.  of  New  Jersey,  capital,  $1,000,000,  all  owned 
by  the  American,  was  organized  and  took  over  the  assets  of  the  old  company,  then  under 
receivership.  Its  separate  organization  has  been  preserved. 

The  Durham  Co.  has  acquired  control  of  the  following  competitors  : Reynold’s  Tobacco 
Co.,  F.  R.  Penn  Tobacco  Co.,  and  Wells-Whitehead  Tobacco  Co. 

The  following  companies  came  also  under  the  control  of  the  American  Tobacco  Co. 
through  acquired  stock  ownership. 

S.  Anargyros.  Capital,  $650,000  ; Turkish  cigarettes.  In  1890  the  American  Tobacco 
Co.  procured  the  organization  of  corporation  of  S.  Anargyros,  which  took  over  that  indi- 
vidual’s going  business  and  has  since  controlled  it.  Through  this  company  the  business 
in  Turkish  cigarettes  is  largely  conducted. 

The  John  1', oilman  Co.  (San  Francisco).  Capital,  $200,000;  cigarettes.  In  1900  the 
American  Tobacco  Co.  procured  organization  of  the  John  Bollman  Co.,  which  took  over 
the  business  of  the  former  concern  in  exchange  for  stock.  Its  separate  organization  has 

been  preserved. 


16  THE  AMEKICAN  TOBACCO  CO.  ET  AL.  Y.  THE  UNITED  STATES. 


In  March,  1900,  there  was  organized  in  New  Jersey  a corporation 
known  as  the  American  Snuff  Co.,  with  a capital  of  $25,000,000,  one- 
half  preferred  and  one-half  common,  which  took  over  the  snuff 
business  of  the  P.  Lorillard  Co.,  Continental  Tobacco  Co.,  and  the 
American  Tobacco  Co.,  with  that  of  a large  competitor,  viz,  the 
Atlantic  Snuff  Co.  The  stock  of  the  new  company  was  thus  ap- 
portioned: Atlantic  Snuff  Co.,  preferred,  $7,500,000,  common, 
$25,000,000;  P.  Lorillard  Co.,  preferred,  $1,124,700,  common, 
$3,459,400;  the  American  Tobacco  Co.,  preferred,  $1,177,800,  com- 
mon $3,227,500;  Continental  Tobacco  Co.,  preferred,  $197,500,  com- 
mon, $813,100.  The  stock  issued  to  Continental  Tobacco  Co.  and  the 
defendants,  P.  Lorillard  Co.  and  the  American  Tobacco  Co.,  is  still 
held  by  the  latter,  and  they  have  at  all  times  had  a controlling  in- 
terest in  the  snuff  company.  All  the  companies,  together  with  their 
officers  and  directors,  convenanted  that  they  would  not  thereafter  en- 
gage as  competitors  in  the  tobacco  business  or  the  manufacture,  sale, 
or  distribution  of  snuff. 

Among  the  assets  transferred  by  the  Atlantic  Snuff  Co.  to  American 
Snuff  Co.  were  all  the  shares  ($600,000)  of  W.  E.  Garrett  & Sons 
(Inc.),  then  and  now  one  of  the  oldest  and  very  largest  producers  of 
snuff,  for  a long  time  and  still  engaged  at  Yorkland,  Del.,  in  inter- 
state and  foreign  commerce  in  tobacco  and  its  products,  and  which 
controlled  through  stock  ownership  the  Southern  Snuff  Co.,  Mem- 
phis, Tenn. ; Dental  Snuff  Co.,  Lynchburg,  Ya. ; and  Stewart-Ralph 
Snuff  Co.,  Clarksville,  Tenn.  The  separate  existence  of  W.  E.  Gar- 
rett & Sons  (Inc.)  has  been  preserved  and  its  business  conducted 
under  the  corporate  name.  In  March,  1900,  the  American  Snuff  Co. 
acquired  all  the  shares  of  George  W.  Helme  Co.,  one  of  the  oldest 
and  largest  producers  of  snuff  and  actively  engaged  at  Helmetta, 
N.  J.,  in  interstate  and  foreign  commerce  in  competition  with  defend- 
ants, by  issuing  in  exchange  therefor  $2,000,000  preferred  stock  and 
$1,000,000  common ; and  it  thereafter  took  a conveyance  of  all  assets 
of  the  acquired  company  and  now  operates  the  plant  under  its  own 
name. 

As  a result  of  the  transactions  just  stated,  it  came  to  pass  that  the 
American  Tobacco  Co.,  which  had  at  the  end  of  the  first  period  only 
a very  small  percentage  of  the  snuff-manufacturing  business,  came 
virtually  to  have  the  dominant  control  as  a manufacturer  of  that 
product. 

(2)  Conley  Foil  Co .,  manufacturers  of  tinfoil , an  essential  for 
'packing  tobacco  products. — In  December,  1899,  the  American  To- 
bacco Co.  secured  control  of  the  business  of  John  Conley  & Sous,  a 
partnership,  of  New  York  City.  By  agreement  the  Conley  Foil  Co. 
was  incorporated  in  New  York  “ for  trading  and  manufacturing,” 
etc.,  with  $250,000  capital,  ultimately  increased  to  $825,000.  The 
corporation  took  over  the  business  and  assets  of  the  firm,  and  the 
American  Tobacco  Co.  became  owner  of  a majority  of  the  shares  of 
stock.  The  Conley  Foil  Co.  has  acquired  all  the  shares  of  stock  of 
the  Johnson  Tinfoil  & Metal  Co.,  of  St.  Louis,  a leading  competitor, 
and  they  supply,  under  fixed  contracts  at  remunerative  prices,  the 
tinfoil  used  by  the  defendants,  which  constitutes  the  major  part  of 
the  total  production  in  the  United  States. 

(3)  American  Cigar  Co. — Prior  to  1901  the  American  and  Conti- 
nental Tobacco  Cos.  manufactured,  sold,  and  distributed  cigars, 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  17 

stogies,  and  cheroots.  In  the  year  stated  the  companies  determined 
to  engage  in  the  business  upon  a larger  scale.  Under  agreement 
with  Powell,  Smith  & Co.,  large  manufacturers  and  dealers  in  cigars, 
they  caused  the  incorporation  in  New  Jersey  of  the  American  Cigar 
Co.,  “ for  trading  and  manufacturing,”  etc.,  to  which  all  three  con- 
veyed their  said  business,  and  it  has  since  carried  on  the  same.  The 
American  and  Continental  Cos.  each  acquired  46^  per  cent  of  the 
shares  and  Powell,  Smith  & Co.  7 per  cent;  the  original  capitaliza- 
tion was  $10,000,000  (afterwards  $20,000,000),  and  more  than  three- 
fourths  is  owned  by  the  former.  The  cigar  company  acquired  many 
competitors  (partnerships  and  corporations)  engaged  in  interstate 
and  foreign  commerce,  taking  from  the  parties  covenants  against 
engaging  in  the  tobacco  business;  and  it  has  also  procured  the  or- 
ganization of  controlled  corporations  which  have  acquired  competing 
manufacturers,  jobbers,  and  distributors  in  the  United  States,  Cuba, 
and  Porto  Rico.  It  manufactures,  sells,  and  distributes  a consider- 
able percentage  of  domestic  cigars;  is  the  dominating  factor  in  the 
tobacco  business,  foreign  and  domestic,  in  Cuba  and  Porto  Rico,  and 
is  there  engaged  in  tobacco  planting.  It  also  controls  corporate  job- 
bers in  California,  Alabama,  Virginia,  Pennsylvania,  Georgia,  Lou- 
isiana, New  Jersey,  and  Tennessee. 

(4)  The  M ac Andrews  & Forbes  Co .,  manufacturers  of  licorice. — • 
There  is  no  question  that  licorice  paste  is  an  essential  ingredient  in 
the  manufacture  of  plug  tobacco,  and  that  one  who  is  debarred  from 
obtaining  such  paste  would  therefore  be  unable  to  engage  in  or 
carry  on  the  manufacture  of  such  product.  The  control  over  this 
article  was  thus  secured:  In  May,  1902,  the  Continental  Co.  secured 
control  of  MacAndrews  & Forbes  Co.,  of  Newark,  N.  J.,  and  organ- 
ized “ for  trading  and  manufacturing  ” a corporation  known  as  the 
MacAndrews  & Forbes  Co.,  with  a capital  of  $7,000,000,  $4,000,000 
preferred  and  $3,000,000  common,  which  took  over  the  business  of 
MacAndrews  & Forbes  and  another  large  competitor.  The  Conti- 
nental Co.  acquired  two-thirds  of  the  common  stock  by  agreeing  to 
purchase  its  supply  of  paste  from  the  new  company.  The  American 
Tobacco  Co.,  at  the  time  of  the  filing  of  the  bill,  was  the  owner  of 
$2,112,900  of  the  common  stock  and  $750,000  preferred.  By  various 
purchases  and  agreements  the  MacAndrews  & Forbes  Co.  acquired, 
substantially,  the  business  of  all  competitors.  Thus,  in  June,  1902, 
it  purchased  the  business  of  the  Stamford  Manufacturing  Co.,  of 
Stamford,  Conn.,  and  incorporated  the  National  Licorice  Co.,  which 
acquired  the  business  of  Young  & Smylie  and  F.  B.  & V.  P.  Scudder, 
and  the  National  Co.  agreed  with  MacAndrews  & Forbes  not  to  pro- 
duce licorice  for  tobacco  manufacturers.  In  1906  all  the  stock  in  the 
J.  S.  Young  Co. — $1,800,000 — which  had  been  organized  to  take  over 
the  business  of  the  J.  S.  Young  Co.,  of  Baltimore,  Md.,  was  acquired 
by  the  MacAndrews  & Forbes  Co.  The  MacAndrews  & Forbes  Co. 
use  in  excess  of  95  per  cent  of  the  licorice  root  consumed  in  the 
United  States. 

(5)  American  Stogie  Co. — In  May,  1903,  the  American  Cigar  Co. 
and  the  American  and  Continental  Tobacco  Cos.  caused  the  Ameri- 
can Stogie  Co.  to  be  incorporated  in  New  Jersey  with  $11,979,000 
capital,  which  immediately  took  over  the  stogie  and  tobie  business 
of  the  companies  named  in  exchange  for  $8,206,275  stock,  and  then 

S.  Doc.  40,  62-1 2 


18  THE  AMEKICAN  TOBACCO  CO.  ET  AL.  Y.  THE  UNITED  STATES. 

in  the  usual  ways  acquired  the  business  of  others  in  the  manufac- 
ture, sale,  and  distribution  of  such  products,  with  covenants  not  to 
compete.  It  acquired,  in  exchange  for  $3,647,725  stock,  all  shares 
of  United  States  Cigar  Co.  (which  had  previously  acquired  and 
owned  the  business  of  important  competitors)  and  subsequently  took 
the  conveyance  of  the  plant  and  assets.  The  majority  shares  always 
have  been  held  by  defendant,  the  American  Cigar  Co. 

As  we  think  the  legitimate  inferences  deducible  from  the  undis- 
puted facts  which  we  have  thus  stated  will  be  sufficient  to  dispose  of 
the  controversy,  we  do  not  deem  it  necessary  to  expand  this  statement 
so  as  to  cause  it  to  embrace  a recital  of  the  undisputed  facts  con- 
cerning the  entry  of  the  American  Tobacco  Co.  into  the  retail  to- 
bacco trade  through  the  acquisition  of  a controlling  interest  in  the 
stock  of  what  is  known  as  the  United  Cigar  Stores  Co.,  as  well  as 
to  some  other  subjects  which,  for  the  sake  of  brevity,  we  likewise 
pass  over  in  order  to  come  at  once  to  a statement  concerning  the  for- 
eign companies. 

The  English  companies. — In  September,  1901,  the  American  To- 
bacco Co.  purchased,  for  $5,347,000,  a Liverpool  (England)  corpora- 
tion, known  as  Ogden’s  Limited,  there  engaged  in  manufacturing  and 
distributing  tobacco  products.  A trade  conflict  which  at  once  ensued 
caused  many  of  the  English  manufacturers  to  combine  into  an  incor- 
poration known  as  the  Imperial  Tobacco  Co.  of  Great  Britain  and 
Ireland,  capital  £15,000,000,  afterwards  increased  to  £18,000,000, 
sterling.  The  trade  war  was  continued  between  this  corporation  and 
the  American  Tobacco  Co.,  with  a result  substantially  identical  with 
that  which  had  hitherto,  as  we  have  seen,  arisen  from  such  ,a 
situation. 

In  September,  1902,  the  Imperial  and  the  American  companies  en- 
tered into  contracts  (executed  in  England)  stipulating  that  the 
former  should  limit  its  business  to  the  United  Kingdom,  except  pur- 
chasing leaf  in  the  United  States  (it  buys  54,000,000  pounds  an- 
nually) ; that  the  American  companies  should  limit  their  business  to 
the  United  States,  its  dependencies,  and  Cuba ; and  that  the  British- 
American  Tobacco  Co.,  with  capital  of  £6,000,000  apportioned 
between  them,  should  be  organized,  take  over  the  export  business  of 
both,  and  operate  in  other  countries,  etc.  This  arrangement  was  im- 
mediately put  into  effect  and  has  been  observed. 

The  Imperial  Co.  holds  one-third  and  the  American  Co.  two-thirds 
of  the  capital  stock  of  the  British  American  Tobacco  Co.  (Ltd.). 
The  latter  company  maintains  a branch  office  in  New  York  City,  and 
the  vice  president  of  the  American  Tobacco  Co.  is  a principal  officer. 
This  company  uses  large  quantities  of  domestic  leaf,  partly  exported 
to  various  plants  abroad  and  about  half  manufactured  here  and  then 
exported.  By  agreement  all  this  is  purchased  through  the  American 
Tobacco  Co.  In  addition  to  many  plants  abroad,  it  has  warehouses 
in  various  States  and  plants  at  Petersburg,  Va.,  and  Durham,  N.  C., 
where  tobacco  is  manufactured  and  then  exported. 

The  purchase  of  necessary  leaf  tobacco  in  the  United  States  by  the 
Imperial  Co.  is  now  made  through  a resident  general  agent  and  is 
exported  as  a part  of  foreign  commerce. 

Not  to  break  the  continuity  of  the  narrative  of  facts,  we  have 
omitted  in  the  proper  chronological  order  to  state  the  facts  relative 
to  what  was  known  as  the  Consolidated  Tobacco  Co.  We  now  par- 
ticularly refer  to  that  subject. 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  19 


The  Consolidated  Tobacco  Co. — In  June,  1901,  parties  largely  in- 
terested in  the  American  and  Continental  Cos.  caused  the  incorpora- 
tion in  New  Jersey  of  the  Consolidated  Tobacco  Co.,  capital 
$30,000,000  (afterwards  $40,000,000),  with  broad  powers  and  per- 
petual existence;  to  do  business  throughout  the  world,  and  to  guar- 
antee securities  of  other  companies,  etc.  A majority  of  shares  was 
taken  by  a few  individuals  connected  with  the  old  concerns:  A.  N. 
Brady,  J.  B.  Duke,  A.  H.  Payne,  Thomas  Ryan,  W.  C.  Whitney,  and 
P.  A.  B.  Widener.  J.  B.  Duke,  president  of  both  the  old  companies, 
became  president  of  the  Consolidated.  Largely  in  exchange  for 
bonds  the  new  company  acquired  substantially  all  the  shares  of  com- 
mon stock  of  the  old  ones.  Its  business  of  holding  and  financing  was 
continued  until  1904,  when,  with  the  American  and  Continental  Cos., 
it  was  merged  into  the  present  American  Tobacco  Co. 

By  proceedings  in  New  Jersey,  October,  1904,  the  (old)  American 
Tobacco  Co.,  Continental  Tobacco  Co.,  and  Consolidated  Tobacco  Co. 
were  merged  into  one  corporation,  under  the  name  of  the  American 
Tobacco  Co.,  the  principal  defendant  here.  The  merged  company, 
with  perpetual  existence,  was  capitalized  at  $180,000,000  ($80,000,000 
preferred,  ordinarily  without  power  to  vote). 

The  powers  conferred  by  the  charter  are  stated  in  the  margin.1 

Prior  to  the  merger  the  Consolidated  Tobacco  Co.,  a majority  of 
whose  $40,000,000  share  capital  was  held  by  J.  B.  Duke,  Thomas  F. 
Ryan,  William  C.  Whitney,  Anthony  N.  Brady,  Peter  A.  B.  Widener, 
and  Oliver  H.  Payne,  had  acquired,  as  already  stated,  nearly  all  com- 
mon shares  of  both  old  American  and  Continental  Cos.,  and  thereby 
control.  The  preferred  shares,  however,  were  held  by  many  indi- 
viduals. Through  the  method  of  distribution  of  the  stock  of  the 
new  company,  in  exchange  for  shares  in  the  old  American  and  in  the 
Continental  Co.,  it  resulted  that  the  same  six  men  in  control  of  the 
combination  through  the  Consolidated  Tobacco  Co.  continued  that 
control  by  ownership  of  stock  in  the  merged  or  new  American  To- 
bacco Co.  The  assets,  property,  etc.,  of  the  old  companies  passed  to 
the  American  Tobacco  Co.  (merged),  which  has  since  carried  on  the 
business. 

The  record  indisputably  discloses  that  after  this  merger  the  same 
methods  which  were  used  from  the  beginning  continued  to  be  em- 
ployed. Thus,  it  is  beyond  dispute:  First,  that  since  the  organi- 
zation of  the  new  American  Tobacco  Co.  that  company  has  acquired 
four  large  tobacco  concerns;  that  restrictive  covenants  against  en- 
gaging in  the  tobacco  business  were  taken  from  the  sellers,  and  that 
the  plants  were  not  continued  in  operation,  but  were  at  once  aban- 
doned. Second,  that  the  new  company  has,  besides,  acquired  control 
of  eight  additional  concerns,  the  business  of  such  concerns  being  now 
carried  on  by  four  separate  corporations,  all  absolutely  controlled 

1 To  buy,  manufacture,  sell,  and  otherwise  deal  in  tobacco  and  the  products  of  tobacco 
in  any  and  all  forms;  * * * to  guarantee  dividends  on  any  shares  of  the  capital 

stock  of  any  corporation  in  which  said  merged  corporation  has  an  intei'est  as  stock- 
holder; * * * to  carry  on  any  business  operations  deemed  by  such  merged  corpora- 

tion to  be  necessary  or  advisable  in  connection  with  any  of  the  objects  of  its  incorpora- 
tion or  in  furtherance  of  any  thereof,  or  tending  to  increase  the  value  of  its  property  or 
stock  ; * * * to  conduct  business  in  all  other  States,  Territories,  possessions,  and 

dependencies  of  the  United  States  of  America,  and  in  all  foreign  countries;  * * * lo 

purchase  or  otherwise  acquire  and  hold,  sell,  assign,  transfer,  mortgage,  pledge,  or  other- 
wise dispose  of  the  shares  of  the  capital  stock  or  of  any  bonds,  securities,  or  other  evi- 
dences of  indebtedness  created  by  any  other  corporation  or  corporations  of  this  or  any 
other  State  or  Government,  and  to  issue  its  owu  obligations  in  payment  or  exchange 
therefor.  * * * 


20  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 


by  the  American  Tobacco  Co.,  although  the  connection  as  to  two 
of  these  companies  with  that  corporation  was  long  and  persistently 
denied. 

Thus,  reaching  the  end  of  the  second  period  and  coming  to  the 
time  of  the  bringing  of  the  suit,  brevity  prevents  us  from  stopping  to 
portray  the  difference  between  the  condition  in  1890  when  the  (old) 
American  Tobacco  Co.  was  organized  by  the  consolidation  of  five 
competing  cigarette  concerns  and  that  which  existed  at  the  com- 
mencement of  the  suit.  That  situation  and  the  vast  power  which  the 
principal  and  accessory  corporate  defendants  and  the  small  number 
of  individuals  who  own  a majority  of  the  common  stock  of  the  new 
American  Tobacco  Co.  exert  over  the  marketing  of  tobacco  as  a raw 
product,  its  manufacture,  its  marketing  when  manufactured,  and  its 
consequent  movement  in  the  channels  of  interstate  commerce,  indeed 
relatively  over  foreign  commerce,  arid  the  commerce  of  the  whole 
world  in  the  raw  and  manufactured  products  stand  out  in  such  bold 
relief  from  the  undisputed  facts  which  have  been  stated  as  to  lead 
us  to  pass  at  once  to  the  second  fundamental  proposition  which  we  are 
required  to  consider — that  is,  the  construction  of  the  antitrust  act 
and  the  application  of  the  act  as  rightly  construed  to  the  situation 
as  proven  in  consequence  of  .having  determined  the  ultimate  aVid 
final  inferences,  properly  deducible  from  the  undisputed  facts  which 
we  have  stated; 


THE  CONSTRUCTION  AND  APPLICATION  OF  THE  ANTITRUST  ACT. 


If  the  antitrust  law  is  applicable  to  the  entire  situation  here  pre- 
sented and  is  adequate  to  afford  complete  relief  for  the  evils  winch 
the  United  States  insists  that  situation  presents,  it  can  only  be  be- 
cause that  law  will  be  given  a more  comprehensive  application  than 
has  been  affixed  to  it  in  any  previous  decision.  This  will  be  the  case 
because  the  undisputed  facts  as  we  have  stated  them  involve  questions 
as  to  the  operation  of  the  antitrust  law  not  hitherto  presented  in  any 
case.  Thus,  even  if  the  ownership  of  stock  by  the  American  Tobacco 
Co.  in  the  accessory  and  subsidiary  companies  and  the  ownership  of 
stock  in  any  of  those  companies  among  themselves  were  held,  as  was 
decided  in  the  Standard  Oil  Co.  case,  to  be  a violation  of  the  act  and 
all  relations  resulting  from  such  stock  ownership  were  therefore  set 
aside  the  question  would  yet  remain  whether  the  principal  defendant, 
the  American  Tobacco  Co.,  and  the  five  accessory  defendants,  even 
when  divested  of  their  stock  ownership  in  other  corporations,  by 
virtue  of  the  power  which  they  would  continue  to  possess,  even 
although  thus  stripped,  would  amount  to  a violation  of  both  the  first 
and  second  sections  of  the  act.  Again,  if  it  were  held  that  the  cor- 
porations, the  existence  whereof  was  due  to  a combination  between 
such  companies  and  other  companies  was  a violation  of  the  act,  the 
question  would  remain  whether  such  of  the  companies  as  did  not  owe 
their  existence  and  power  to  combinations,  but  whose  power  alone 
arose  from  the  exercise  of  the  right  to  acquire  and  own  property, 
would  be  amenable  to  the  prohibitions  of  the  act.  Yet,  further,  even 
if  this  proposition  was  held  in  the  affirmative,  the  question  would  re- 
main whether  the  principal  defendant,  the  American  Tobacco  Co., 
when  stripped  of  its  stock  ownership,  would  be  in  and  of  itself  within 
the  prohibitions  of  the  act,  although  that  company  was  organized  and 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  21 

took  being  before  the  antitrust  act  was  passed.  Still  further,  the 
question  would  yet  remain  whether  particular  corporations  which, 
when  bereft  of  the  power  which  they  possessed  as  resulting  from 
stock  ownership,  Although  they  were  not  inherently  possessed  of  a 
sufficient  residuum  of  power  to  cause  them  to  be  in  and  of  themselves 
either  a restraint  of  trade  or  a monopolization  or  an  attempt  to 
monopolize,  should  nevertheless  be  restrained  because  of  their  inti- 
mate connection  and  association  with  other  corporations  found  to  be 
within  the  prohibitions  of  the  act.  The  necessity  of  relief  as  to  all 
these  aspects,  we  think,  seemed  to  the  Government  so  essential,  and 
the  difficulty  of  giving  to  the  aqt  such  a cqmprehensive  and  coherent 
construction  as  would  be  adequate  to  enable  it  to  meet  the  entire 
situation,  led  to  what  appears  to  us  to  be  in  their  essence  a resort  to 
methods  of  construction  not  compatible  one  with  the  other.  And  the 
same  ■'apparent  conflict  is  presented  by  the  views  of  the  act  taken  by 
the  defendants  when  their  contentions  are  accurately  tested. 

Thus  the  Government,  for  the  purpose  of  fixing  the  illegal  char- 
acter of  the  original  combination  which  organized  the  old  American 
Tobacco  Co.,  asserts  that  the  illegal  character  of  the  combination  is 
plainly  shown  because  the  combination  was  brought  about  to  stay_ 
the  progress  of  a flagrant  and  ruinous  trade  war.  In  other  words, 
the  contention  is  that  as  the  act  forbids  every  contract  and  combi- 
nation it  hence  prohibits,  a reasonable  and  just  agreement  made  for 
the  purpose  of  ending  a trade  war.  But  as  thus  construing  the  act 
by  the  rule  of  the  letter  which  kills  would  necessarily  operate  to 
take  out  of  the  reach  of  the  act  some  of  the  accessory  and  many  sub- 
sidiary corporations,  the  existence  of  which  depend  not  at  all  upon 
combination  or  agreement  or  contract,  but  upon  mere  purchases  of 
property,  it  is  insisted  in  many  forms  of  argument  that  the  rule  of 
construction  to  be  applied  must  be  the  spirit  and  intent  of  the  act, 
and  therefore  its  prohibitions  must  be  held  to  extend  to  acts  even 
if  not  within  the  literal  terms  of  the  statute  if  they  are  within  its 
spirit,  because  done  with  an  intent  to  bring  about  the  harmful  results 
which  it  was  the  purpose  of  the  statute  to  prohibit.  So  as  to  the 
defendants.  While  it  is  argued  on  the  one  hand  that  the  forms  by 
which  various  properties  were  acquired  in  view  of  the  letter  of  the 
act  exclude  many  of  the  assailed  transactions  from  condemnation, 
it  is  yet  urged  that  giving  to  the  act  the  broad  construction  which 
it  should  rightfully  receive,  whatever  may  be  the  form,  no  condemna- 
tion should  follow,  because  looking  at  the  case  as  a whole  every  act- 
assailed  is  shown  to  have  been  but  a legitimate  and  lawful  result  of 
the  exertion  of  honest  business  methods  brought  into  play  for  the 
purpose  of  advancing  trade  instead  of  with  the  object  of  obstructing 
and  restraining  the  same.  But  the  difficulties  which  arise,  from  the 
complexity  of  the  particular  dealings  which  are  here  involved  and 
the  situation  which  they  produce,  we  think  grows  out  of  a plain 
misconception  of  both  the  letter  and  spirit  of  the  antitrust  act.  We 
say  of  the  letter,  because  while  seeking  by  a narrow  rule  of  the  letter 
to  include  things  which  it  is  deemed  would  otherwise  be  excluded 
the  contention  really  destroys  the  great  purpose  of  the  act,  since  it 
renders  it  impossible  to  apply  the  law  to  a multitude  of  wrongful  acts, 
which  would  come  within  the  scope  of  its  remedial  purposes  by  resort 
to  a reasonable  construction,  although  they  would  not  be  within  its 
reach  by  a too  narrow  and  unreasonable  adherence  to  the  strict  letter. 


22  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 


This  must  be  the  case  unless  it  be  possible  in  reason  to  say  that  for  the 
purpose  of  including  one  class  of  acts  which  would  not  otherwise  be 
embraced  a literal  construction,  although  in  conflict  with  reason,  must 
be  applied,  and  for  the  purpose  of  including  other  acts  which  would 
not  otherwise  be  embraced  a reasonable  construction  must  be  resorted 
to.  That  is  to  say,  two  conflicting  rules  of  construction  must  at  one 
and  the  same  time  be  applied  and  adhered  to. 

The  obscurity  and  resulting  uncertainty,  however,  is  now  but  an 
abstraction,  because  it  has  been  removed  by  the  consideration  which 
we  have  given  quite  recently  to  the  construction  of  the  antitrust  act 
in  the  Stanard  Oil  case.  In  that  case  it  was  held,  without  departing 
from  any  previous  decision  of  the  court,  that  as  the  statute  had  not 
defined  the  words  “ restraint  of  trade,”  it  became  necessary  to  con- 
strue those  words,  a duty  which  could  only  be  discharged  by  a resort 
to  reason.  We_  say  the  doctrine  thus  stated  was  in  accord  with  all 
the  previous  decisions  of  this  court,  despite  the  fact  that  the  contrary 
view  was  sometimes  erroneously  attributed  to  some  of  the  expressions 
usecT in  two  pricur  decision s.  ( Trans-Missouri  Freight  Association 
amTTIoint  Traffic  cases,  1G6  U.  S.,  290,  and  171  U.  S.,  505.)  That 
such  view  was  a mistaken  one  was  fully  pointed  out  in  the  Standard 
Oil  case  and  is  additionally  shown  by  a passage  in  the  opinion  in 
the  Joint  Traffic  case,  as  follows  (171  U.  S.,  568)  : “The  act  of  Con- 
gress must  have  a reasonable  construction  or  else  there  would  scarcely 
be  an  agreement  or  contract  among  business  men  that  could  not  be 
said  to  have,  indirectly  or  remotely,  some  bearing  on  interstate  com- 
merce, and  possibly  to  restrain  it.”  ^“Applying  the  rule  of  reason  to 
the  construction  of  the  statute,  it  was  held  in  the  Standard  Oil  case 
that  as  the  words  “ restraint  of  trade  ” at  common  law  and  in  the 
law  of  this  country  at  the  time  of  the  adoption  of  the  antitrust  net 
only  embraced  acts  or  contracts  or  agreements  or  combinations  which 
open) ted^ to  the~prcjudice  of  the  public  interests  by  unduly  restnet- 
mg  competition'll  midnlv  obstructing  the  due  course  of  trade  or 
which7~either  because  of  their~Tnherent  nature  or  effect  or  because 
oTthe  evident  purpose  of  the  acts,  etc.,  injuriously  restrained  trade. 
tlTat^liiewvcuTts~as~iised  in  the~~statute  were  designed  toTiave  and  did 
Have  I5ut~a  like  significance,  .pit  was  therefore  pointed  out  that  the 
statute  did  not  forbid  or”  restrain  the  power  to  make  normal  and 
usual  contracts  to  further  trade  by  resorting  to  all  normal  methods, 
whether  by  agreement  or  otherwise,  to  accomplish  such  purpose. 

In  other  words,  it  was  held  not  that  acts  which  the  statute  pro- 
hibited could  be  removed  from  the  control  of  its  prohibitions  by  a 
‘finding  that  they  were  reasonable,  but  that  the  duty  to  interpret 
which  inevitably  arose  from  the  general  character  of  the  term  “ re- 
straint of  trade  ” required  that  the  words  “ restraint  of  trade”  should 
be  given  a meaning  which  would  not  destroy  the  individual  right  to 
contract  and  render  difficult  if  not  impossible  any  movement  of  trade 
in  the  channels  of  interstate  commerce — the  free  movement  of  which 
it  was  the  purpose  of  the  statute  to  protect.  The  soundness  of  the 
rule  that  the  statute  should  receive  a reasonable  construction,  after 
further  mature  deliberation,  we  see  no  reason  to  doubt.  Indeed,  the 
necessity  for  not  departing  in  this  case  from  the  standard  of  the 
rule  of  reason  which  is  universal  in  its  application  is  so  plainly  re- 
quired in  order  to  give  effect  to  the  remedial  purposes  which  the  act 
under  consideration  contemplates,  and  to  prevent  that  act  from 


THE  AMERICAN  TOBACCO'  CO.  ET  AL.  V.  THE  UNITED  STATES.  23 


destroying  all  liberty  of  contract  and  all  substantial  right  to  trade, 
and  thus  causing  the  act  to  be  at  war  with  itself  by  annihilating  the 
fundamental  right  of  freedom  to  trade  which,  on  the  very  face  of 
the  act,  it  was  enacted  to  preserve,  is  illustrated  by  the  record  before 
us.  In  truth,  the  plain  demonstration  which  this  record  gives  of 
the  injury  which  would  arise  from  and  the  promotion  of  the  wrongs 
which  the  statute  was  intended  to  guard  against  which  would 
result  from  giving  to  the  statute  a narrow,  unreasoning,  and  unheard 
of  construction,  as  illustrated  by  the  record  before  us,  if  possible 
serves  to  strengthen  our  conviction  as  to  the  correctness  of  the  rule 
of  construction,  the  rule  of  reason,  which  was  applied  in  the  Stand- 
ard Oil  case,  the  application  of  which  rule  to  the  statute  we  now,  in 
the  most  unequivocal  terms,  reexpress  and  reaffirm. 

Coming  then  to  apply  to  the  case  before  us  the  act  as  interpreted  in 
the  Standard  Oil  and  previous  cases,  all  the  difficulties  suggested  hy 
the  mere  form  in  which  the  assailed  transactions  are  clothed  become 
of  no  moment.  This  follows  because,  authough  it  was  held  in  the 
Standard  Oil  case  that,  giving  to  the  statute  a reasonable  construc- 
tion, the  words  “ restraint  of  trade  ” did  not  embrace  all  those  normal 
and  usual  contracts  essential  to  individual  freedom  and  the  right  to 
make  which  were  necessary  in  order  that  the  course  of  trade  might  be 
free,  yet,  as  a result  of  the  reasonable  construction  which  was  affixed 
to  the  statute,  it  was  pointed  out  that  the  generic  designation  of  the 
first  and  second  sections  of  the  law,  when  taken  together,  embraced 
every  conceivable  act  which  could  possibly  come  within  the  spirit  or 
purpose  of  the  prohibitions  of  the  law,  without  regard  to  the  garb  in 
which  such  acts  were  clothed.  That  is  to  say,  it  was  held  that  in 
view  of  the  general  language  of  the  statute  and  the  public  policy 
which  it  manifested,  there  was  no  possibility  of  frustrating  that  pol- 
icy by  resorting  to  any  disguise  or  subterfuge  of  form,  since  resortto 
reason  rendered  it  impossible  to  escape  by  any  indirection  the  prohi- 
bitions ot  the  statute^  7 

“Considering,  then,  the  undisputed  facts  which  we  have  previously 
stated,  it  remains  only  to  determine  whether  they  establish  that  the 
acts,  contracts,  agreements,  combinations,  etc.,  which  were  assailed 
were  of  such  an  unusual  and  wrongful  character  as  to  bring  them 
within  the  prohibitions  of  the  law.  That  they  were,  in  our  opinion, 
so  overwhelmingly,  results  from  the  undisputed  facts  that  it  seems 
only  necessary  to  refer  to  the  facts  as  we  have  stated  them  to  demon- 
strate the  correctness  of  this  conclusion.  Indeed,  the  history  of  the 
combination  is  so  replete  with  the  doing  of  acts  which  it  was  the 
obvious  purpose  of  the  statute  to  forbid,  so  demonstrative  of  the 
existence  from  the  beginning  of  a purpose  to  acquire  dominion  and 
control  of  the  tobacco  trade,  not  by  the  mere  exertion  of  the  ordinary 
right  to  contract  and  to  trade,  but  by  methods  devised  in  order  to 
monopolize  the  trade  by  driving  competitors  out  of  business,  which 
were  ruthlessly  carried  out  upon  the  assumption  that  to  work  upon 
the  fears  or  play  upon  the  cupidity  of  competitors  would  make  suc- 
cess possible.  We  say  these  conclusions  are  inevitable,  not  because 
of  the  vast  amount  of  property  aggregated  by  the  combination,  not 
because  alone  of  the  many  corporations  which  the  proof  shows  were 
united  by  resort  to  one  device  or  another.  Again,  not  alone  because 
of  the  dominion  and  control  over  the  tobacco  trade  Avhich  actually 
exists,  but  because  we  think  the  conclusion  of  wrongful  purpose  and 


24  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 

illegal  combination  is  overwhelmingly  established  by  the  following 
considerations : 

(a)  By  the  fact  that  the  very  first  organization  or  combination 
was  impelled  by  a previously  existing  fierce  trade  war,  evidently  in- 
spired by  one  or  more  of  the  minds  which  brought  about  and  became 
parties  to  that  combination. 

(b)  Because,  immediately  after  that  combination  and  the  increase 
of  capital  which  followed,  the  acts  which  ensued  justify  the  infer- 
ence that  the  intention  existed  to  use  the  power  of  the  combination 
as  a vantage  ground  to  further  monopolize  the  trade  in  tobacco  by 
means  of  trade  conflicts  designed  to  injure  others,  either  by  driving 
competitors  out  of  the  business  or  compelling  them  to  become  parties 
to  a combination — a purpose  whose  execution  was  illustrated  by  the 
plug  war  which  ensued  and  its  results,  by  the  snuff  war  which  fol- 
lowed and  its  results,  and  by  the  conflict  which  immediately  followed 
the  entry  of  the  combination  in  England  and  the  division  of  the 
world’s  business  by  the  two  foreign  contracts  which  ensued. 

( c ) By  the  ever-present  manifestation  which  is  exhibited  of  a con- 
scious wrongdoing  by  the  form  in  which  the  various  transactions 
were  embodied  from  the  beginning,  ever  changing  but  ever  in  sub- 
stance the  same.  Now  the  organization  of  a new  company,  now  the 
control  exerted  by  the  taking  of  stock  in  one  or  another  or  in  several, 
so  as  to  obscure  the  result  actually  attained,,  nevertheless  uniform,  in 
their  manifestations  of  the  purpose  to  restrain  others  and  to  monopo- 
lize and  retain  power  in  the  hands  of  the  few  who,  it  would  seem, 
from  the  beginning  contemplated  the  mastery  of  the  trade  which 
practically  followed. 

( d ) By  the  gradual  absorption  of  control  over  all  the  elements 
essential  to  the  successful  manufacture  of  tobacco  products,  and  plac- 
ing such  control  in  the  hands  of  seemingly  independent  corporations 
serving  as  perpetual  barriers  to  the  entry  of  others  into  the  tobacco 
trade. 

( e ) By  persistent  expenditure  of  millions  upon  millions  of  dollars 
in  buying  out  plants,  not  for  the  purpose  of  utilizing  them,  but  in 
order  to  close  them  up  and  render  them  useless  for  the  purposes  of 
trade. 

(/)  By  the  constantly  recurring  stipulations,  whose  legality,  iso- 
latedly  viewed,  we  are  not  considering,  by  which  numbers  of  persons, 
whether  manufacturers,  stockholders  or  employees,  were  required  to 
bind  themselves,  generally  for  long  periods,  not  to  compete  in  the 
future.  Indeed,  when  the  results  of  the  undisputed  proof  which  we 
have  stated  are  fully  apprehended,  and  the  wrongful  acts  which  they 
exhibit  are  considered,  there  comes  inevitably  to  the  mind  the  con- 
viction that  it  was  the  danger  which  it  was  deemed  would  arise  to 
individual  liberty  and  the  public  well-being  from  acts  like  those 
which  this  record  exhibits,  which  led  the  legislative  mind  to  conceive 
and  to  enact  the  antitrust  act,  considerations  which  also  serve  to 
clearly  demonstrate  that  the  combination  here  assailed  is  within  the 
law  as  to  leave  no  doubt  that  it  is  our  plain  duty  to  apply  its  prohi- 
bitions. 

In  stating  summarily,  as  we  have  done,  the  conclusions  which,  in 
our  opinion,  are  plainly  deducible  from  the  undisputed  facts,  we  have 
not  paused  to  give  the  reasons  wThy  we  consider,  after  great  considera- 
tion, that  the  elaborate  arguments  advanced  to  affix  a different  com- 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  25 

plexion  to  the  case  are  wholly  devoid  of  merit.  We  do  not,  for 
the  sake  of  brevity,  moreover,  stop  to  examine  and  discuss  the  vari- 
ous propositions  urged  in  the  argument  at  bar  for  the  purpose  of 
demonstrating  that  the  subject  matter  of  the  combination  which  we 
find  to  exist  and  the  combination  itself  are  not  within  the  scope  of 
the  antitrust  law,  because  when  rightly  considered  they  are  merely 
matters  of  intrastate  commerce,  and  therefore  subject  alone  to  State 
control.  We  have  done  this  because  the  want  of  merit  in  all  the 
arguments  advanced  on  such  subjects  is  so  completely  established  by 
the  prior  decisions  of  this  court,  as  pointed  out  in  the  Standard  Oil 
case,  as  not  to  require  restatement. 

Leading  as  this  does  to  the  conclusion  that  the  assailed  combination 
in  all  its  aspects — that  is  to  say,  whether  it  be  looked  at  from  the 
point  of  view  of  stock  ownership  or  from  the  standpoint  of  the  prin- 
cipal corporation  and  the  accessory  or  subsidiary  corporations  viewed 
independently,  including  the  foreign  corporations  in  so  far  as  by  the 
contracts  made  by  them  they  became  cooperators  in  the  combination — 
comes  within  the  prohibitions  of  the  first  and  second  sections  of  the 
antitrust  act,  it  remains  only  finally  to  consider  the  remedy  which  it 
is  our  duty  to  apply  to  the  situation  thus  found  to  exist. 

THE  REMEDY. 

Our  conclusion  being  that  the  combination  as  a whole,  involving 
all  its  cooperating  or  associated  parts,  in  whatever  form  clothed, 
constitutes  a restraint  of  trade  within  the  first  section,  and  an  at- 
tempt to  monopolize  or  a monopolization  within  the  second  section 
of  the  antitrust  act,  it  follows  that  the  relief  which  we  are  to  afford 
must  be  \vider  than  that  awarded  by  the  lower  court,  since  that 
court  merely  decided  that  certain  of  the  corporate  defendants  con- 
stituted combinations  in  violation  of  the  first  section  of  the  act, 
because  of  the  fact  that  they  were  formed  by  the  union  of  previously 
competing  concerns  and  that  the  other  defendants  not  dismissed 
from  the  action  were  parties  to  such  combinations  or  promoted 
their  purposes.  We  hence,  in  determining  the  relief  proper  to  be 
given,  may  not  model  our  action  upon  that  granted  by  the  court 
below,  but  in  order  to  enable  us  to  award  relief  coterminous  with 
the  ultimate  redress  of  the  wrongs  which  we  find  to  exist,  we  must 
approach  the  subject  of  relief  from  an  original  point  of  view.  Such 
subject  necessarily  takes  a twofold  aspect — the  character  of  the 
permanent  relief  required  and  the  nature  of  the  temporary  relief 
essential  to  be  applied  pending  the  working  out  of  permanent  re- 
lief in  the  event  that  it  be  found  that  it  is  impossible  under  the 
situation  as  it  now  exists  to  at  once  rectify  such  existing  wrongful 
condition.  In  considering  the  subject  from  both  of  these  aspects 
three  dominant  influences  must  guide  our  action:  (1)  The  duty  of 
giving  complete  and  efficacious  effect  to  the  prohibitions  of  the 
statute;  (2)  the  accomplishing  of  this  result  with  as  little  injury  as 
possible  to  the  interest  of  the  general  public;  and  (3)  a proper  re- 
gard for  the  vast  interests  of  private  property  which  may  have 
become  vested  in  many  persons  as  a result  of  the  acquisition  either 
by  way  of  stock  ownership  or  otherwise  of  interests  in  the  stock  or 
securities  of  the  combination  without  any  guilty  knowledge  or  intent 
in  any  way  to  become  actors  or  participants  in  the  wrongs  which  we 


26  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 


find  to  have  inspired  and  dominated  the  combination  from  the  be- 
ginning. Mindful  of  these  considerations  and  to  clear  the  way  for 
their  application  we  say  at  the  outset  without  stopping  to  amplify 
the  reasons  which  lead  us  to  that  conclusion,  we  think  that  the  court 
below  clearly  erred  in  dismissing  the  individual  defendants,  the 
United  Cigar  Stores  Co.  and  the  foreign  corporations  and  their 
subsidiary  corporations. 

Looking  at  the  situation  as  we  have  hitherto  pointed  it  out,  it 
involves  difficulties  in  the  application  of  remedies  greater  than  have 
been  presented  by  any  case  involving  the  antitrust  law  which  has 
been  hitherto  considered  by  this  court:  First,  because  in  this  case  it 
is  obvious  that  a mere  decree  forbidding  stock  ownership  by  one  part 
of  the  combination  in  another  part  or  entity  thereof  would  afford 
no  adequate  measure  of  relief,  since  different  ingredients  of  the  com- 
bination would  remain  unaffected,  and  by  the  very  nature  and  char- 
acter of  their  organization  would  be  able  to  continue  the  wrongful 
situation  which  it  is  our  duty  to  destroy;  second,  because  the  methods 
of  apparent  ownership  by  which  the  wrongful  intent  was  in  part 
carried  out  and  the  subtle  devices  which,  as  Ave  have  seen,  wrere  re- 
sorted to  for  the  purpose  of  accomplishing  the  wrong  contemplated, 
by  way  of  ownership  or  otherwise,  are  of  such  a character  that  it  is 
difficult  if  not  impossible  to  formulate  a remedy  which  could  restore 
in  their  entirety  the  prior  lawful  conditions;  third,  because  the 
methods  devised  by  which  the  various  essential  elements  to  the  suc- 
cessful operation  of  the  tobacco  business  from  any  particular  aspect 
have  been  so  separated  under  various  subordinate  combinations,  yet 
so  unified  by  way  of  the  control  worked  out  by  the  scheme  here  con- 
demned, are  so  involved  that  any  specific  form  of  relief  which  we 
might  now  order  in  substance  and  effect  might  operate  really  to 
injure  the  public  and,  it  may  be,  to  perpetuate  the  wrong.  Doubtless 
it  was  the  presence  of  these  difficulties  which  caused  the  United 
States,  in  its  prayer  for  relief,  to  tentatively  suggest  rather  than  to 
specifically  demand  definite  and  precise  remedies;  Ave  might  at  once 
resort  to  one  or  the  other  of  two  general  remedies — (a)  the  allowance 
of  a permanent  injunction  restraining  the  combination  as  a uni- 
versality and  all  the  individuals  and  corporations  which  form  a part 
of  or  cooperate  in  it  in  any  manner  or  form  from  continuing  to  en- 
gage in  interstate  commerce  until  the  illegal  situation  be  cured,  a 
measure  of  relief  which  Avould  accord  in  substantial  effect  with  that 
aAvarded  below  to  the  extent  that  the  court  found  illegal  combina- 
tions to  exist;  or  (fr)  to  direct  the  appointment  of  a receiver  to  take 
charge  of  the  assets  and  property  in  this  country  of  the  combination 
in  all  its  ramifications  for  the  purpose  of  preATenting  a continued 
violation  of  the  laAv,  and  thus  working  out  by  a sale  of  the  property 
of  the  combination  or  otherwise  a condition  of  things  Avhich  Avould 
not  be  repugnant  to  the  prohibitions  of  the  act. 

But,  having  regard  to  the  principles  which  Ave  haATe  said  must  con- 
trol our  action,  Ave  do  not  think  Ave  can  iioav  direct  the  immediate 
application  of  either  of  these  remedies.  We  so  consider  as  to  the  first 
because  in  vieAv  of  the  extent  of  the  combination,  the  vast  field  Avhich 
it  covers,  the  all-embracing  character  of  its  activities  concerning 
tobacco  and  its  products,  to  at  once  stay  the  movement  in  interstate 
commerce  of  the  products  which  the  combination  or  its  cooperating 
forces  produce  or  control  might  inflict  infinite  injury  upon  the  public 


THE  AMERICAN  TOBACCO'  CO.  ET  AL.  V.  THE  UNITED  STATES.  27 


by  leading  to  a stoppage  of  supply  and  a great  enhancement  of  prices. 
The  second  because  the  extensive  power  which  would  result  from  at 
once  resorting  to  a receivership  might  not  only  do  grievous  injury  to 
the  public,  but  also  cause  widespread  and  perhaps  irreparable  loss  to 
many  innocent  people.  Under  these  circumstances,  taking  into  mind 
the  complexity  of  the  situation  in  all  of  its  aspects  and  giving  weight 
to  the  many-sided  considerations  which  must  control  our  judgment, 
we  think,  so  far  as  the  permanent  relief  to  be  awarded  is  concerned, 
we  should  decree  as  follows : 

First.  That  the  combination  in  and  of  itself,  as  well  as  each  and  all 
of  the  elements  composing  it,  whether  corporate  or  individual, 
whether  considered  collectively  or  separately,  be  decreed  to  be  in  re- 
straint of  trade  and  an  attempt  to  monopolize  and  a monopolization 
within  the  first  and  second  sections  of  the  antitrust  act. 

Second.  That  the  court  below,  in  order  to  give  effective  force  to  our 
decree  in  this  regard,  be  directed  to  hear  the  parties,  by  evidence  or 
otherwise,  as  it  may  be  deemed  proper,  for  the  purpose  of  ascertain- 
ing and  determining  upon  some  plan  or  method  of  dissolving  the 
combination  and  of  re-creating,  out  of  the  elements  now  composing  it, 
a new  condition  which  shall  be  honestly  in  harmony  with  and  not 
repugnant  to  the  law. 

Third.  That  for  the  accomplishment  of  these  purposes,  taking  into 
view  the  difficulty  of  the 'Situation,  a period  of  six  months  is  allowed 
from  the  receipt  of  our  mandate,  with  leave,  however,  in  the  event,  in 
the  judgment  of  the  court  below,  the  necessities  of  the  situation 
require,  to  extend  such  period  to  a further  time  not  to  exceed  60  days. 

Fourth.  That  in  the  event,  before  the  expiration  of  the  period  thus 
fixed,  a condition  of  disintegration  in  harmony  with  the  law  is  not 
brought  about,  either  as  the  consequence  of  the  action  of  the  court  in 
determining  an  issue  on  the  subject  or  in  accepting  a plan  agreed 
upon,  it  shall  be  the  duty  of  the  court,  either  by  way  of  an  injunction 
restraining  the  movement  of  the  products  of  the  combination  in  the 
channels  of  interstate  or  foreign  commerce  or  by  the  appointment  of 
a receiver,  to  give  effect  to  the  requirements  of  the  statute. 

Pending  the  bringing  about  of  the  result  just  stated,  each  and  all  of 
the  defendants,  individuals  as  well  as  corporations,  should  be  re- 
strained from  doing  any  act  which  might  further  extend  or  enlarge 
the  power  of  the  combination,  by  any  means  or  device  whatsoever.  In 
view  of  the  considerations  we  have  stated,  we  leave  the  matter  to  the 
court  below  to  work  out  a compliance  with  the  law  without  unneces- 
sary injury  to  the  public  or  the  rights  of  private  property. 

While  in  many  substantial  respects  our  conclusion  is-in  accord  with 
that  reached  by  the  court  below,  and  while  also  the  relief  which  we 
think  should  be  awarded  in  some  respects  is  coincident  with  that 
which  the  court  granted,  in  order  to  prevent  any  complication  and  to 
clearly  define  the  situation  we  think  instead  of  affirming  and  modify- 
ing, our  decree,  in  view  of  the  broad  nature  of  our  conclusions,  should 
be  one  of  reversal  and  remanding  with  directions  to  the  court  below 
to  enter  a decree  in  conformity  with  this  opinion  and  to  take  such 
further  steps  as  may  be  necessary  to  fully  carry  out  the  directions 
which  we  have  given. 

And  it  is  so  ordered. 


SUPREME  COURT  OF  THE  UNITED  STATES. 


Nos.  118  and  119. — October  Term,  1910. 


118. 

The  United  States  of  America,  appel- 
lant, 
v. 

The  American  Tobacco  Company  and 
others. 

119. 

The  American  Tobacco  Company  and 
others,  appellants, 
v. 

The  United  States  of  America. 

[May  29,  1911.] 

Mr.  Justice  Harlan  concurred  in  part  and  dissented  in  part : 

I concur  with  many  things  said  in  the  opinion  just  delivered  for  the 
court,  but  it  contains  some  observations  from  which  I am  compelled  to 
withhold  my  assent. 

I agree  most  thoroughly  with  the  court  in  holding  that  the  prin- 
cipal defendant,  the  American  Tobacco  Co.  and  its  accessory  and  sub- 
sidiary corporations  and  companies,  including  the  defendant  Eng- 
lish corporations,  constitute  a combination  which,  “ in  and  of  itself, 
as  well  as  each  and  all  of  the  elements  composing  it,  whether  cor- 
porate or  individual,  whether  considered  collectively  or  separately,” 
is  illegal  under  the  antitrust  act  of  1890,  and  should  be  decreed  to  be 
in  restraint  of  interstate  trade  and  an  attempt  to  monopolize  and  a 
monopolization  of  part  of  such  trade. 

The  evidence  in  the  record  is,  I think,  abundant  to  enable  the  court 
to  render  a decree  containing  all  necessary  details  for  the  suppression 
of  the  evils  of  the  combination  in  question.  But  the  case  is  sent  back, 
with  directions  further  to  hear  the  parties,  by  evidence  or  otherwise, 
“ for  the  purpose  of  ascertaining  and  determining  upon  some  plan  or 
method  of  dissolving  the  combination,  and  of  re-creating  out  of  the 
elements  now  composing  it,  a new  condition  ” which  shall  not  be  re- 
pugnant to  law.  The  court,  in  its  opinion,  says  of  the  present  combi- 
nation, that  its  illegal  purposes  are  overwhelmingly  established  by 
many  facts,  among  others — 

by  the  ever-present  manifestation  which  is  exhibited  of  a conscious  wrong- 
doing by  the  form  in  which  the  various  transactions  were  embodied  from  the 

29 


Appeals  from  the  Circuit 
Court  of  the  United 
States  for  the  Southern 
District  of  New  York. 


30  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES. 


beginning,  ever  changing,  but  ever  in  substance  the  same.  Now  the  organization 
of  a new  company,  now  the  control  exerted  by  the  taking  of  stock  in  one  or 
another,  or  in  several,  so  as  to  obscure  the  result  actually  attained,  nevertheless 
uniform  in  their  manifestations  of  the  purpose  to  restrain  others,  and  to  monop- 
olize and  retain  power  in  the  hands  of  the  few,  who,  it  would  seem,  from  the 
beginning  contemplated  the  mastery  of  the  trade  which  practically  followed. 
By  the  gradual  absorption  of  control  over  all  the  elements  essential  to  the 
successful  manufacture  of  tobacco  products  and  placing  such  control  in  the 
hands  of  seemingly  independent  corporations  serving  as  perpetual  barriers  to 
the  entry  of  others  into  the  tobacco  trade. 

The  court  further  says  of  this  combination  and  monopoly : 

The  history  of  the  combination  is  so  replete  with  the  doing  of  acts  which  it 
was  the  obvious  purpose  of  the  statute  to  forbid,  so  demonstrative  of  the  exist- 
ence, from  the  beginning,  of  a purpose  to  acquire  dominion  and  control  of  the 
tobacco  trade,  not  by  the  mere  exertion  of  the  ordinary  right  to  contract  and 
to  trade,  but  by  methods  devised  to  monopolize  the  trade  by  driving  competitors 
out  of  business,  which  were  ruthlessly  carried  out,  upon  the  assumption  that 
to  work  upon  the  fears  or  play  upon  the  cupidity  of  competitors  would  make 
success  possible. 

But  it  seems  that  the  course  I have  suggested  is  not  to  be  pursued. 
The  case  is  to  go  back  to  the  circuit  court  in  order  that  out  of  the 
elements  of  the  old  combination  a new  condition  may  be  “ re-created  ” 
that  will  not  be  in  violation  of  the  law.  I confess  my  inability  to 
find,  in  the  history  of  this  combination,  anything  to  justify  the  wish 
that  a new  condition  should  be  “ re-created  ” out  of  the  mischievous 
elements  that  compose  the  present  combination,  which,  together  with 
its  component  parts,  have,  without  ceasing,  pursued  the  vicious 
methods  pointed  out  by  the  court.  If  the  proof  before  us — as  it  un- 
doubtedly does — warrants  the  characterization  which  the  court  has 
made  of  this  monster  combination,  why  can  not  all  necessary  direc- 
tions be  now  given  as  to  the  terms  of  the  decree?  In  my  judgment 
there  is  enough  in  the  record  to  enable  this  court  to  formulate  specific 
directions  as  to  what  the  decree  should  contain.  Such  directions 
would  not  only  end  this  litigation,  but  would  serve  to  protect  the 
public  against  any  more  conscious  wrongdoing  by  those  who  have 
persistently  and  “ ruthlessly,”  to  use  this  court’s  language,  pursued 
illegal  methods  to  defeat  the  act  of  Congress. 

I will  not  say  what,  in  my  opinion,  should  be  the  form  of  the  de- 
cree nor  speculate  as  to  what  the  details  ought  to  be.  It  will  be  time 
enough  to  speak  on  that  subject  when  we  have  the  decree  before  us. 
I will,  however,  say  now  that,  in  my  opinion,  the  decree  below  should 
be  affirmed  as  to  the  tobacco  company  and  its  accessory  and  subsid- 
iary companies  and  reversed  on  the  cross  appeal  of  the  Government. 

But  my  objections  have  also  reference  to  those  parts  of  the  court’s 
opinion  reaffirming  what  it  said  recently  in  the  Standard  Oil  case 
about  the  former  decisions  of  this  court  touching  the  antitrust  act. 
We  are  again  reminded,  as  we  were  in  the  Standard  Oil  case,  of  the 
necessity  of  applying  the  “ rule  of  reason  ” in  the  construction  of 
this  act  of  Congress — an  act  expressed,  as  I think,  in  language  so 
clear  and  simple  that  there  is  no  room  whatever  for  construction. 

Congress,  with  full  and  exclusive  power  over  the  whole  subject,  has 
signified  its  purpose  to  forbid  every  restraint  of  interstate  trade,  in 
whatever  form,  or  to  whatever  extent,  but  the  court  has  assumed  to 
insert  in  the  act,  by  construction  merely,  words  which  make  Congress 
say  that  it  means  only  to  prohibit  the  “ undue  ” restraint  of  trade. 


THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED  STATES.  31 


If  I do  not  misapprehend  the  opinion  just  delivered,  the  court  in- 
sists that  what  was  said  in  the  opinion  in  the  Standard  Oil  case  was 
| in  accordance- with  our  previous  decisions  in  the  Trans-Missouri  and 
l Joint  Traffic  cases  (166  U.  S.,  290;  lTl  U.  S.,  505),  if  we  resort  to 
! reason.  This  statement  surprises  me  quite  as  much  as  would  a state- 
ment that  black  was  white  or  white  Avas  black.  It  is  scarcely  just  to 
the  majority  in  those  two  cases  for  the  court  at  this  late  day  to  say 
or  to  intimate  that  they  interpreted  the  act  of  Congress  without  re- 
gard to  the  “ rule  of  reason,”  or  to  assume,  as  the  court  now  does,  that 
the  act  Avas,  for  the  first  time  in  the  Standard  Oil  case,  interpreted  in 
the  “ light  of  reason.”  One  thing  is  certain,  “ rule  of  reason,”  to 
which  the  court  refers,  does  not  justify  the  perversion  of  the  plain 
words  of  an  act  in  order  to  defeat  the  will  of  Congress. 

By  every  conceivable  form  of  expression  the  majority,  in  the 
Trans-Missouri  and  Joint  Traffic  cases,  adjudged  that  the  act  of 
Congress  did  not  allow  restraint  of  interstate  trade  to  any  extent  or 
in  any  form,  and  three  times  it  expressly  rejected  the  theory,  which 
had  been  persistently  advanced,  that  the  act  should  be  construed  as 
if  it  had  in  it  the  word  “unreasonable”  or  “undue.”  But  now  the 
court,  in  accordance  with  what  it  denominates  the  “ rule  of  reason,” 
in  effect  inserts  in  the  act  the  word  “ undue,”  which  means  the  same 
as  “ unreasonable,”  and  thereby  makes  Congress  say  what  it  did  not 
say,  Avhat,  as  I think,  it  plainly  did  not  intend  to  say,  and  what, 
since  the  passage  of  the  act,  it  has  explicitly  refused  to  say.  It  has 
steadily  refused  to  amend  the  act  so  as  to  tolerate  a restraint  of  inter- 
state commerce  even  where  such  restraint  could  be  said  to  be  “ reason- 
able ” or  “due.”  In  short,  the  court  iioav,  by  judicial  legislation,  in 
effect  amends  an  act  of  Congress  relating  to  a subject  over  which 
that  department  of  the  Government  has  exclusive  cognizance.  I beg 
to  say  that,  in  my  judgment,  the  majority,  in  the  former  cases,  were 
guided  by  the  “rule  of  reason”;  for,  it  may  be  assumed,  that  they 
knew  quite  as  Avell  as  others  what  the  rules  of  reason  require  Avhen  a 
court  seeks  to  ascertain  the  will  of  Congress  as  expressed  in  a statute. 
It  is  ob\fious,  from  the  opinions  in  the  former  cases,  that  the  majority 
did  not  grope  about  in  darkness,  but  in  discharging  the  solemn  duty 
put  on  them  they  stood  out  in  the  full  glare  of  the  “ light  of  reason  ” 
and  felt  and  said  time  and  again  that  the  court  could  not,  con- 
sistently with  the  Constitution,  and  Avould  not,  usurp  the  functions 
of  Congress  by  indulging  in  judicial  legislation.  They  said  in  ex- 
press words,  in  the  former  cases,  in  response  to  the  earnest  conten- 
tions of  counsel,  that  to  insert  by  construction  the  word  “ unreason- 
able ” or  “ undue  ” in  the  act  of  Congress  Avould  be  judicial  legislation. 
Let  me  say,  also,  that  as  we  all  agree  that  the  combination  in  ques- 
tion Avas  illegal  under  any  construction  of  the  antitrust  act,  there  was 
not  the  slightest  necessity  to  enter  upon  an  extended  argument  to 
shoAv  that  the  act  of  Congress  Avas  to  be  read  as  if  it  contained  the 
Avord  “unreasonable”  or  “undue.”  All  that  is  said  in  the  court’s 
opinion  in  support  of  that  view  is,  I say  with  respect,  obiter  dicta , 
pure  and  simple. 

These  vieAvs  are  fully  discussed  in  the  dissenting  opinion  delivered 
by  me  in  the  Standard  Oil  case.  I will  not  repeat  what  is  therein 
stated,  but  it  may  be  well  to  cite  an  additional  authority.  In  the 
Trade-Mark  cases  (100  U.  S.,  82),  the  court  was  asked  to  sustain  the 


3 0112  061942287 

32  THE  AMERICAN  TOBACCO  CO.  ET  AL.  V.  THE  UNITED 

constitutionality  of  the  statute  there  involved.  But  the  statute  could 
not  have  been  sustained  except  by  inserting  in  it  words  not  put  there 
by  Congress.  Mr.  Justice  Miller,  delivering  the  unanimous  judgment 
of  the  court,  said : 

If  we  should,  in  the  case  before  us,  undertake  to  make  by  judicial  construction 
a law  which  Congress  did  not  make,  it  is  quite  probable  we  should  do  what,  if 
the  matter  were  now  before  that  body,  it  would  be  unwilling  to  do. 

This  language  was  cited  with  approval  in  Employer’s  Liability 
cases  (207  U.  S.,  463,  502).  I refer  to  my  dissenting  opinion  in  the 
Standard  Oil  case  as  containing  a full  statement  of  my  views  of  this 
particular  question. 

For  the  reasons  stated,  I concur  in  part  with  the  court’s  opinion 
and  dissent  in  part. 


O 


